Lower interest rates would spur a faster Philippine economic expansion next year, according to the Washington-based multilateral lender International Monetary Fund (IMF).

Referring to its latest forecasts for the Philippines contained in the recently published July 2025 World Economic Outlook (WEO) report, an IMF spokesperson said in an email on Thursday, July 31, that gross domestic product (GDP) growth “is projected to moderate to 5.5 percent in 2025 from 5.7 percent in 2024, reflecting the impact of recent global trade policy conflicts and elevated policy uncertainty.”

To recall, the IMF retained its 2025 Philippine GDP growth projection, which now reached the lower end of the government’s downgraded target range of 5.5 to 6.5 percent for this year.

Further, “growth is projected to pick up to 5.9 percent in 2026, on the back of robust consumption and an increase in investment, which will be supported by monetary policy easing.”

This week, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said the central bank is considering another 25-basis-point (bp) rate cut as early as August, following improved clarity on United States (US) tariff risks.

Since the start of its easing cycle in August last year, the BSP has already reduced its key policy rate by a total of 125 bps, bringing it down to the current 5.25 percent last month.

The IMF slightly raised its 2026 growth forecast for the Philippines from 5.8 percent in the April 2025 WEO, even as the upgraded outlook remained below the Marcos Jr. administration’s downscaled six- to seven-percent goal for next year.

“The forecast for 2026 reflects a positive contribution from smaller-than-expected consolidation in 2026 as announced in the authorities’ revised Medium-Term Fiscal Framework, which is expected to be partially offset by a higher impact of uncertainty on private demand than was earlier envisioned in the April WEO,” the IMF spokesperson said, in response to questions emailed early this week.

Meanwhile, the IMF’s real GDP growth estimate for 2025 “is unchanged relative to the April WEO, reflecting offsetting effects from higher growth in trading partners contributing positively, and lower-than-expected first-quarter outturn and higher energy prices contributing negatively.” The Philippine economy grew by a dismal 5.4 percent year-on-year in the first three months, while local oil prices skyrocketed at the height of the Israel-Iran conflict in June.

For the IMF, “the main downside risks to growth include an escalation of trade measures, prolonged uncertainty, and geopolitical tensions,” adding that “extreme climate events and other natural disasters also constitute downside risks.”

“On the upside, accelerated implementation of structural reforms and a reduction in infrastructure gaps can contribute to higher growth over the medium-term,” the IMF spokesperson added.

The IMF said that its outlook for the Philippines has not yet reflected US President Donald Trump’s looming 19-percent tariff on Philippine exports to America, which would take effect on Friday, Aug. 1.

“As this is still an initial agreement, we have not yet conducted a detailed assessment of its potential impact. We will provide an assessment once further details are available, including in the context of the next 2025 Article IV, to be conducted in the fall,” the IMF spokesperson said.