Washington-based multilateral lender International Monetary Fund (IMF) has tweaked downwards its economic growth projections for the Philippines this year and the next, following its more somber outlook for 2025 amid corruption allegations and climate disruptions.

According to the IMF’s updated World Economic Outlook (WEO), Philippine gross domestic product (GDP) is now seen expanding at a slower 5.1 percent, down from its earlier forecast of 5.4 percent—both of which fall short of the country’s already lowered target of at least 5.5 percent.

Despite the cut, the IMF’s forecast remains slightly more optimistic than the Bangko Sentral ng Pilipinas’ (BSP) assumption of a 4.6 percent growth rate, which the central bank has attributed to a loss of confidence tied to governance concerns.

For 2026 and 2027, the IMF also trimmed its growth forecasts to 5.6 percent from a previous 5.8 percent, and to 5.8 percent from 6.1 percent, respectively. The central bank’s projection of 5.4 percent for 2026 stands lower than the IMF’s forecast, while its 6.2 percent forecast for 2027 is higher.

These projections still fall within the revised targets, based on National Socioeconomic Planner Arsenio M. Baliscan’s lower growth assumptions. Baliscan expects growth to clock in at five to six percent in 2026, and 5.5 to 6.5 percent in 2027—both lowered from the earlier goals of six to seven percent.

According to the IMF, the downward adjustment for 2026 and 2027 “reflects the carryover impact from a downward revision in the IMF’s growth forecast for 2025—from 5.4 to 5.1 percent—and a slower pace of capital accumulation.”

It noted that the slashed GDP growth forecast for 2025 reflects the output slump in the third quarter of 2025 “amid recent corruption allegations and climate shocks impacting economic activity in the second half of the year.”

To recall, the Philippine economy expanded by four percent in the third quarter of 2025—the weakest in four and a half years.

Looking ahead, output expansion could accelerate slower than expected mainly due to the potential “escalation of trade restrictions and prolonged uncertainty, geopolitical tensions, and disruptive financial market corrections.”

“On the upside, accelerated implementation of structural and governance reforms can boost investment and foreign direct investments (FDI), increase fiscal multipliers and boost potential growth,” the lender said.

What would drive the economy in the medium term is robust private consumption and higher investment, the IMF said, “supported by monetary policy easing and the authorities’ recent policy initiatives to support private investment.”

For its part, the BSP signalled preparedness to deploy a deeper round of interest-rate cuts as a secondary line of defense if the country’s economic expansion fails to hold above the five-percent level this year.

BSP Governor Eli M. Remolona Jr. earlier said any deterioration in consumer demand or national output would force the central bank to extend its easing beyond the planned 25-basis-point cut.

Think tank GlobalSource Partners wrote in a commentary published on Monday, Jan. 19, that while the Marcos administration’s initiative to reach out and regain the private sector’s confidence could help cushion the economy, a deeper concern remains to be addressed.

GlobalSource Partners economist Diwa Guinigundo said that more than administrative delays, “weak transparency, selective enforcement and execution of public projects, and uncertain accountability” contribute more to the erosion of the private sector’s trust.

Guinigundo said entrenched corruption diverts public funds away from research, innovation, and infrastructure, weakening the economy’s long-term competitiveness. “Failure to invest well condemns the country to slower growth, weaker productivity, lower efficiency, and declining regional relevance,” he stressed.

“Policy declarations, while necessary, are insufficient,” he said, noting that confidence will be restored if the government clearly delivers on governance reforms. These include fair law enforcement, an end to impunity, and credible accountability for public officials regardless of rank or political ties.

He added that maintaining a lower budget deficit and a more disciplined approach to government borrowing are also important.

“Without these, efforts to streamline regulations and promote investments will remain cosmetic—and business sentiment will continue to slump despite official assurances,” Guinigundo said.