The Washington-based Institute of International Finance (IIF) sees the Philippine economy growing below the government's goal this and next year mainly due to external developments—especially the slowing Chinese economy and forthcoming US tariffs—impacting global trade.

In a Dec. 11 report, IIF deputy chief economist Ashok Bhundia and associate economist Phoebe Feng forecasted the Philippines' gross domestic product (GDP) to grow by 5.8 percent both in 2024 and 2025, below the six to 6.5 percent as well as six to eight percent, respectively, targeted by the Marcos Jr. administration's economic team.

These Philippine growth projections are nonetheless above last year's 5.5-percent expansion.

Among the seven emerging Asia-Pacific economies covered by the IIF report, the Philippines is poised to grow the second fastest after above six percent growth rates projected for India in the two-year period.

The IIF expects regional growth to further slow to 4.6 percent from the projected five percent this year and last year's 5.4 percent.

"Looking ahead, US tariffs are the key downside risk, depending on their size and scope. Punitive tariffs on China would hurt emerging markets in Asia's growth through their integration into China's supply chains, final demand, and excess capacity spillover, while blanket US tariffs could hurt Asian economies directly," the IIF explained.

"Emerging Asian markets' central banks could respond through more front-loaded policy rate cuts. However, a strong dollar, a more hawkish Fed, and higher US long-term bond yields would limit room for monetary easing and put pressure on currencies and capital flows," it added.

In the Philippines' case, the IIF said that while the country is "less exposed" to global trade and slower Chinese demand, it's more reliant on dollar financing, hence "likely to face increased pressure from a strong US dollar and 'higher-for-longer' US Fed Funds policy rate."

"The Philippines, in particular, stands out due to its higher external financing needs, given its larger twin current account and fiscal deficits," the IIF said.

Expectations of downward global oil prices next year, meanwhile, would benefit consumer spending in the Philippines, according to the IIF.

As for opportunistic foreign bond and equity portfolio flows or so-called "hot money," the IIF said India, Indonesia and the Philippines "maintain positive interest rate differentials with the US and could benefit from their relative resilience to China's slowdown and portfolio diversification."

But the IIF believes nonresident capital flows to Asian emerging markets may increase if ever the US and China pursues a trade agreement to avoid tariffs.

Also, the IIF deems that improved business conditions in the US due to the incoming Trump 2.0 administration's deregulation plan could likely benefit Asia.