IMF sees slower Philippine growth amid graft scandal, global shocks

THE PHILIPPINE ECONOMY may expand slower until next year as global uncertainties and the local corruption controversy continue to drag growth, the International Monetary Fund (IMF) said.   

In its latest World Economic Outlook (WEO) released on Monday, the IMF said it expects Philippine gross domestic product (GDP) to grow by 5.6% this year, within the government’s 5%-6% goal.

This is the same projection given following its Article IV Consultation with the country last December, but slightly lower than its 5.7% estimate in the previous WEO.

At the same time, the IMF cut its Philippine GDP growth forecast for 2027 to 5.8% from its 6% projection in October. This also falls within the government’s 5.5%-6.5% target.

“The downward revision in GDP growth projections 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% — and a slower pace of capital accumulation,” an IMF spokesperson said in an e-mail.

For 2025, the multilateral lender expected Philippine GDP to grow by 5.1%, unchanged from December forecast. However, this is below its 5.4% forecast given in October.

This came after the flood control corruption mess led to slower economic growth and government spending. In the third quarter, GDP grew by 4% — the weakest growth in over four years. This brought year-to-date GDP growth to 5%.

The IMF said that climate shocks in the latter half of the year also contributed to the economic slowdown.

“The downward revision for 2025 in turn reflects a sharper-than-expected slowdown in Q3 amid recent corruption allegations and climate shocks impacting economic activity in the second half of the year,” it said.

In 2025, the Philippines encountered 23 tropical cyclones, affecting millions of Filipinos and leaving billions of pesos in damages nationwide, according to data from the state weather bureau.

The IMF earlier said that weather disruptions have trimmed the country’s GDP by 0.2%-0.3% yearly and accelerated inflation by up to 0.6 percentage point annually.

The multilateral lender said that lingering uncertainty over tighter trade restrictions, geopolitical tensions, and disruptive financial market corrections could dampen the country’s economic growth.

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

Meanwhile, the IMF forecasts 6% GDP growth for the Philippines in 2028, at the low end of the government’s 6%-7% target.

“Economic growth will be driven by robust consumption and higher investment, supported by monetary policy easing and the authorities’ recent policy initiatives to support private investment,” the IMF said.

The Bangko Sentral ng Pilipinas (BSP) has been on an easing path since August 2024, having delivered a total of 200 basis points (bps) in cuts.

In October and December last year, it slashed the key policy rate by 25 bps each in a move to spur domestic demand amid waning consumer and investor sentiment due to the flood control mess.

The benchmark interest rate now stands at an over three-year low of 4.5%, which the central bank said is already close to their ideal rate, signaling an end to its current easing cycle.

BSP Governor Eli M. Remolona, Jr. has left the door open to another 25-bp cut at their Feb. 19 review but said that further easing may be unlikely considering current economic data.

Still, he noted that a weaker-than-expected growth may prompt them to deliver two rate cuts this year to help stimulate the economy. — Katherine K. Chan