The International Monetary Fund (IMF) slightly raised its economic growth forecast for the Philippines for 2026 even as output this year and next year would continue to grow below the country’s full potential.

In its World Economic Outlook (WEO) Update report for July 2025, published on July 29 (Tuesday night Manila time), the IMF hiked its Philippine gross domestic product (GDP) growth projection for 2026 to 5.9 percent from 5.8 percent in the April 2025 WEO.

However, the IMF’s higher growth forecast for 2026 remained below the Marcos Jr. administration’s downgraded six- to seven-percent goal for next year.

The Washington-based multilateral lender retained its 2025 Philippine growth projection of 5.5 percent, which now hit the lower end of the government’s downscaled target range of 5.5 to 6.5 percent for this year.

The IMF’s growth expectations for the Philippines for the next two years are beneath the country’s potential of six-percent annual expansion, which economic managers had conceded would be unattainable in the near term due to global uncertainties spilling over locally.

Back in April, the IMF said its 2024 and 2025 GDP growth expectations for the Philippines took into consideration “external developments, including the direct impact of higher tariffs on the Philippines’ goods exports to the United States (US), downward revisions to trading partners’ growth, and impact of higher uncertainty and financial tightening.”

Last week, President Ferdinand Marcos Jr. and US President Donald Trump struck a deal to slightly lower US tariffs on Philippine-made goods to 19 percent from the 20 percent threatened by Trump at the start of the month. During his “Liberation Day” announcement last April, Trump wanted to impose a reciprocal tariff of 17 percent on the Philippines, lower than the rate that was agreed upon with Marcos.

Despite economic growth being subpar in recent years, the IMF had said its 2025 forecast for the Philippines was “relatively robust,” especially amid “a more difficult environment.”

“Domestic consumption remains the key driver for growth and is expected to be supported by lower inflation and low unemployment,” the IMF said in April.

In its updated WEO, the IMF said that globally, growth could be faster than initially expected.

“Global growth is projected at three percent for 2025 and 3.1 percent in 2026. The forecast for 2025 is 0.2-percentage-point (ppt) higher than that in the reference forecast of the April 2025 WEO and 0.1-ppt higher for 2026. This reflects stronger-than-expected front-loading in anticipation of higher tariffs; lower average effective US tariff rates than announced in April; an improvement in financial conditions, including due to a weaker US dollar; and fiscal expansion in some major jurisdictions,” the IMF said.

But the IMF cautioned that risks to the global outlook stayed tilted to the downside, just like three months ago.

“A rebound in effective tariff rates could lead to weaker growth. Elevated uncertainty could start weighing more heavily on activity, also as deadlines for additional tariffs expire without progress on substantial, permanent agreements,” the lender warned.

“Geopolitical tensions could disrupt global supply chains and push commodity prices up. Larger fiscal deficits or increased risk aversion could raise long-term interest rates and tighten global financial conditions. Combined with fragmentation concerns, this could reignite volatility in financial markets,” it added.

For the IMF, “global growth could be lifted if trade negotiations lead to a predictable framework and to a decline in tariffs.”

“Policies need to bring confidence, predictability, and sustainability by calming tensions, preserving price and financial stability, restoring fiscal buffers, and implementing much-needed structural reforms,” according to the IMF.