The Philippines' economic growth would fall below expectations in the next two years as the threat of a global trade war intensifies, according to the International Monetary Fund (IMF).
In its April 2025 World Economic Outlook (WEO) report, published on Tuesday night, April 22 (Philippine time), the Washington-based multilateral lender slashed its 2025 real gross domestic product (GDP) growth forecast for the Philippines to 5.5 percent, from 6.1 percent previously.
If the IMF's updated projection is realized, this year's GDP growth would be the slowest in five years—since the economy suffered from its worst post-war recession in 2020, at the height of the most stringent lockdowns to contain the Covid-19 pandemic.
While the IMF projected Philippine GDP to grow by a faster 5.8 percent next year, it would remain below the government's more ambitious growth target of six to eight percent. Previously, the lender forecast economic expansion of 6.3 percent for 2026.
"The IMF has revised down the growth forecast for 2025, reflecting the lower-than-expected growth outturn in the fourth quarter of 2024, and external developments, including the direct impact of higher tariffs on the Philippines' goods exports to the US, downward revisions to trading partners' growth, and impact of higher uncertainty and financial tightening," said Pavis Devahasadin, the IMF's press officer for the Philippines, in response to questions emailed by Manila Bulletin.
"Downward revisions to growth for 2025 and 2026 are observed throughout the region and globally, reflecting the recent external developments," Devahasadin pointed out.
Devahasadin also explained that "this forecast is what we call in the WEO the 'reference point' forecast based on information available as of April 4, 2025 (including the April 2 tariffs and initial responses), in lieu of the usual baseline."
"It therefore does not include policy measures announced after April 4, 2025. It is also important to note that the forecast is subject to significant uncertainty," Devahasadin added.
In spite of the IMF's tempered growth expectations for the Philippines, the country is seen growing among the fastest across Asia-Pacific in the next two years—only next to India, whose economy would expand by 6.2 percent this year and 6.3 percent next year, based on the latest WEO projections.
"Despite a more difficult environment, growth in the Philippines is expected to remain relatively robust in 2025," Devahasadin said.
For the IMF, this year's growth drivers for the Philippine economy include "recent legislative reforms [that] could facilitate an accelerated implementation of domestic infrastructure projects, including through public-private partnerships (PPPs), and lead to higher foreign direct investment (FDI)."
"Domestic consumption remains the key driver for growth and is expected to be supported by lower inflation and low unemployment," the IMF said.
However, the IMF expects the unemployment rate to rise to 4.5 percent for both this year and next year, from the 19-year low of 3.8 percent in 2024.
Even easing consumer prices would not help much, as the sluggish growth forecasts for 2025 and 2026 would be supported by within-target headline inflation, estimated by the IMF to average 2.6 percent this year and 2.9 percent next year.
The annual rates of price increases that the IMF forecast for the next two years are below the 3.2 percent recorded in 2024, and well-within the two- to four-percent target band of manageable hikes conducive to economic growth.
The IMF nonetheless projected the Philippines' deficit in its current account, or net dollar earnings from foreign goods and services trade, to narrow to 3.4 percent in 2025 and 3.2 percent in 2026, from last year's 3.8 percent.
According to the latest IMF WEO, "major policy shifts are resetting the global trade system and giving rise to uncertainty that is once again testing the resilience of the global economy."
After United States (US) President Donald Trump announced tariffs on all trading partners, "uncertainty, especially that regarding trade policy, has surged to unprecedented levels," the report noted.
"The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity," the IMF warned.
Globally, "intensifying downside risks dominate the outlook," the lender said.
"Ratcheting up a trade war, along with even more elevated trade policy uncertainty, could further reduce near- and long-term growth, while eroded policy buffers weaken resilience to future shocks... Broader financial instability may ensue, including damage to the international monetary system," it added.
Still, the IMF remains hopeful that "a deescalation from current tariff rates and new agreements providing clarity and stability in trade policies could lift global growth."