Lingering corruption issues in the Philippines could push economic growth below five percent in 2025 and 2026, according to the Washington-based Institute of International Finance (IIF).

In a Dec. 4 report, a copy of which was obtained by Manila Bulletin, the IIF slashed its gross domestic product (GDP) growth forecasts for the Philippines to 4.7 percent for 2025 and 4.8 percent for 2026.

As Manila Bulletin reported in June, the global financial industry association had projected Philippine growth at 5.5 percent this year and 5.6 percent next year—weaker than last year’s 5.7 percent.

The IIF’s downgraded projections are well below the government’s already downscaled targets of 5.5 to 6.5 percent for 2025 and six to seven percent for 2026.

Among the eight Asia-Pacific emerging markets (EMs) covered by the IIF report, its growth forecasts for the Philippines were surpassed by Vietnam, India, Indonesia, and China.

Vietnam, for instance, is seen leading the region with projected economic growth of 7.9 percent in 2025 and 7.1 percent in 2026.

“Vietnam stands out as the region’s strongest performer, benefiting from rising FDI [foreign direct investment], firm exports, and steady consumption, and its inclusion in our EM Asia coverage reflects its growing systemic importance,” the IIF said.

Its Philippine projections were also lower than the regional average growth forecasts of 5.3 percent for this year and 4.9 percent for next year.

“Indonesia and the Philippines have worked to restore credibility after political and governance issues earlier in the year,” IIF deputy chief economist Ashok Bhundia and associate economist Phoebe Feng said in the report.

In the case of the Philippines, they were referring to the ongoing probe into flood-control infrastructure corruption that wasted billions, if not trillions, of pesos on “ghost” and substandard government projects over the past few years.

Third-quarter GDP growth fell to a 4.5-year low of four percent year-on-year as spending on public goods and services dropped in the aftermath of the corruption scandal.

Meanwhile, the IIF noted that the Philippines, India, Indonesia, and Thailand are still on a gradual fiscal consolidation path, narrowing yawning budget deficits caused by massive borrowings and expenditures to respond to the health and socioeconomic crises inflicted by the Covid-19 pandemic.

Across emerging Asia, the IIF said growth “remains resilient despite a turbulent external environment marked by United States (US) tariff actions and political uncertainty in several economies.”

“Regional output continues to be supported by strong export performance, solid FDI inflows, and stable domestic demand,” the IIF said.

While Philippine exports to the US have been slapped with a 19-percent tariff since August, the IIF report noted that shipments to America account for only 2.6 percent of 2024 GDP—much smaller compared to Vietnam, Taiwan, Thailand, Malaysia, and South Korea.

For the IIF, “despite the tariff shock earlier in the year, the region’s growth outlook for 2025 and 2026 remains favorable.”

“A combination of structural and cyclical factors has supported Asia’s ability to absorb the tariff shock. Although front-loading and rerouting of shipments provided a temporary boost, the more important driver is the region’s integration into global electronics and technology supply chains, which has allowed several economies to benefit from the rebound in the tech cycle,” the IIF added.