Affirms 2025 outlook at 5.5%
The International Monetary Fund (IMF) has raised its forecast for Philippine economic growth in 2026 to 5.9 percent from a previous 5.8 percent projection, seeing improvements in the country’s financial conditions, the July 2025 World Economic Outlook (WEO) Update released on Tuesday (Washington time) said.
For 2025, the IMF affirmed its outlook for the country’s economic growth at 5.5 percent as its visiting officials forecast in May, when assessments revolved around trade-related uncertainty, cooling inflation and global financial stability.
The IMF forecast for 2025 remains within the government target, though at the low end of the 5.5-6.5 percent range. For next year, the higher IMF forecast of 5.9 percent still stands below the government’s 2026 to 2028 target range of 6 to 7 percent.
The latest IMF forecasts also compare with the previous WEO, which was released in April 2025. The WEO then estimated growth at 5.5 percent for 2025 and 5.7 percent for 2026.
In May, when the IMF staff visited the country for its bi-annual review, the 2026 growth outlook was raised to 5.8 percent, with a warning that downside risks remained, such as the US tariffs on the external side, and the lower-than-expected GDP growth in the first quarter of 5.4 percent, versus the targeted 5.5 to 6.5 percent.
Comparative economic growth in 2024 was 5.7 percent.
PH-IMF consultation
The IMF said in its most recent IMF Article IV Consultation with the Philippines (May 2025) the economy is resilient despite external risks, since consumption will get a boost from the easing of monetary policy rates, low inflation and unemployment.
It said it also expects the fiscal stance will be neutral this year, supported by fiscal consolidation, which it thinks is still appropriate. The IMF said the government can collect higher tax revenues and implement expenditure reforms to contain the deficit, and to have more flexibility in spending.
Tax reforms include higher excise taxes, enhancing VAT efficiency, improving tax administration and ensuring effective control of tax incentives, the IMF said.
As of end-June this year, the budget deficit stood at P765.5 billion, 24.69 percent higher than the same period in 2024. Total revenues increased by 5.15 percent year-on-year to P2.260 trillion, while expenditures reached P3.025 trillion, up by 9.49 percent year-on-year.
Steady credit growth
Meanwhile, the banking system is not exposed to systemic financial risks with steady credit growth, strong capital and liquidity buffers, the IMF said.
However, it noted that banks’ real estate exposures, leveraged non-bank financial institutions and rapidly growing consumer credit market “warrant continued close monitoring.”
Global growth, financial stability
The IMF raised its world economic growth forecast to 3 percent in 2025 and 3.1 percent in 2026. These are higher than its April projections of 2.8 percent and 3 percent, respectively.
For the region, or the Association of Southeast Asian Nations (Asean 5), the IMF forecasts 4.1 percent growth for both 2025 and 2026, a slower growth rate than 4.6 percent in 2024. These July projections are higher than its previous forecasts of 4 percent and 3.9 percent, respectively. The Asean 5 include the Philippines, Indonesia, Malaysia, Singapore and Thailand.
The IMF adjusted the global growth forecast higher due to lower average effective US tariff rates compared with April, better financial conditions because of a weaker US dollar, and fiscal expansion in some major economies.
It noted risks, however, such as tariff rates that could lead to weaker growth; elevated uncertainty that could weigh on economic activity; geopolitical tensions that could disrupt global supply chains and lead to higher commodity prices; larger fiscal deficits which could raise interest rates and tighten global financial conditions.
However, on the upside, the IMF said global growth could increase if trade talks resulted in lower tariffs.
“Policies need to bring confidence, predictability and sustainability by calming tensions, preserving price and financial stability, restoring fiscal buffers and implementing much-needed structural reforms,” the IMF added.
