Both public and private investment in the Philippines are being dampened by Washington’s tariff policy and local corruption controversies, raising the risk that the nation’s economic expansion will miss the government’s targets this year and next.

According to the ASEAN+3 Macroeconomic Research Office’s (AMRO) 2025 Annual Consultation Report on the Philippines, published on Monday, Nov. 24, the Philippine economy is expected to expand more slowly in 2025 and 2026, down from earlier expectations in October.

AMRO reduced its 2025 gross domestic product (GDP) growth forecast to 5.2 percent from 5.6 percent earlier, and to 5.3 percent in 2026 from 5.5 percent previously.

Despite growing above five percent, both of AMRO’s expectations fall below the yearly targets of at least 5.5 percent this year and at least six percent next year. If realized, they would also be slower than the 5.7 percent growth recorded last year and below pre-pandemic levels.

“Private investment and exports face headwinds from external uncertainties due to the US tariff policy, while public investment will be dampened by flood control project controversies,” the report read.

Partially offsetting these risks is the steady expansion in private consumption that AMRO expects.

Meanwhile, AMRO noted that the negative impact of the tariffs imposed by US President Donald Trump on Philippine goods exports is anticipated to be “more pronounced in 2026, while in 2025, it will be partly offset by front-loaded export orders.”

On the positive side, the “adverse effects” of the US trade policy are seen fading in the second half of 2026.

Rizal Commercial Banking Corp. (RCBC) economist Michael Ricafort said US trade policies carry greater weight as a contributor to the sharp slowdown in output growth this year. In percentage points (ppt), US policies are denting local GDP growth by 0.5 ppt.

Debt watcher S&P Global Ratings, in its latest economic outlook for Asia-Pacific (APAC) for the first quarter of 2026, has slashed its economic growth projection for the Philippines to 4.8 percent from 5.6 percent previously.

S&P Global has also lowered its 2026 growth forecast to 5.7 percent from 5.8 percent previously but retained its 6.5-percent GDP growth forecast for both 2027 and 2028. This aligns with the Bangko Sentral ng Pilipinas’ (BSP) recent projections of a recovery in the next two years.

It can be recalled that the central bank had earlier reduced its GDP growth forecasts to 5.3 percent this year and next—both of which fall below their respective growth targets.

To sustain long-term economic expansion, AMRO said there is a need to “refine the government’s growth strategy by upgrading services and boosting private investment.”

For AMRO, the local economy may grow steadily in the coming quarters, but external uncertainties and structural challenges are clouding the outlook for robust long-term growth.

On the external front, AMRO said the “downside risks stem from aggressive US protectionism, tighter immigration policies for migrant workers, slower growth in key trading partners, more volatile global financial conditions, and potential inflationary pressures.”

“Structural challenges—such as prolonged scarring from the Covid-19 pandemic, insufficient infrastructure development, and limited manufacturing capacity—continue to constrain the country’s potential growth over the longer term,” AMRO added.

To anchor growth, S&P has priced in one more quarter-point reduction in key borrowing costs to 4.5 percent. The Monetary Board (MB), the higher monetary policy-setting body, has one more policy meeting left in December.

Policy easing is expected to continue through next year, with a total of 50 basis points (bps) in cuts to four percent—a rate seen remaining unchanged until 2028.