The IMF determines the outlook for the growth of the Philippines until 2027

By Katherine K. Chan, A reporter

THE PHILIPPINE ECONOMY it can send its weak growth this year since epidemic, as In the middle War in the East raises prices and weten economic activityit, the Internanational Monetary The fund (IMF) said.

In its latest World Economic Outlook (WEO) released on Wednesday, the IMF lowered its 2026 gross domestic product (GDP) growth forecast for the Philippines to 3.9% from 4.1% previously. This is still within the government target of 3.5%-4.5%.

“This reflects a weaker-than-expected result in the first quarter of 2026 (2.8%) and a larger-than-expected impact of the Middle East war on prices and employment in the Philippines,” IMF the spokesperson said in an email.

Oil price shocks and the lingering impact of deteriorating flood control dragged the Philippines’ first-quarter GDP growth below market and governmentLabor expectations at 2.8%.

Since the United States and Israel began attacking Iran in Feb. 28, oil prices feed into the costs of other essentials. and consumer pockets.

If the IMF’s projections are true, the country’s annual growth will be weaker than the 4.4% recorded in 2025, when a major flood management corruption scandal reduced public spending, investment, and sentiment.

It would also mark the economy’s worst performance since the 9.5% contraction. The COVID-19 pandemic in 2020.

Without the pandemic, it would be the same as the 3.9% increase in 2011 and would be the worst in 17 years or since 1.4% in 2009.

The growth rate of Philippine international lenders is below ASEAN-5 projections, which ended at 4.1% this year. ASEAN-5 is made up of Indonesia, Malaysia, Philippines, Singapore, and Thailand.

The Philippines is expected to leave behind Indonesia (5%) and Malaysia (4.7%) but surpass Thailand (1.9%) this year.

At the same time, the IMF decided the growth of the Philippines for 2027 to 5.5% from 5.8% previously, after the basic results and possible improvement in sentiments.

This is within the government’s target of 5%-6% per annum. It is also higher than the IMF’s 2027 growth estimate of 4.3% for the ASEAN-5.

“The rebound in 2027 is mainly driven by good results, and a gradual accumulation in investment as confidence grows and war-related negative effects. easily,” said the IMF spokesperson.

According to the international lender, risks to domestic growth may arise due to severe weather disturbances, as well as a slower-than-expected reduction in public investment. momentum.

However, the rapid adoption of reforms, coupled with lower oil and food prices, may provide relief to the economy.

“On the one hand, the rapid implementation of structural and administrative reforms can increase investment and FDI (foreign direct investment), increase financial multipliers and increase potential growth,” said the IMF spokesperson. “Rapid declines in energy and food prices present additional risks.”

FINANCIAL STRENGTH RISKS
Meanwhile, it is multilateral The lender said the Philippines still faces inflationary pressures from volatile global conditions and high food prices, among others.

“Inflation risks are tilted to the upside, reflecting the risk of renewed political tensions in the Middle East and higher food prices, reduced inflation expectations, tighter global financial conditions, and lower outflows,” an IMF spokesperson said.

The latest WEO does not include an update to the IMF’s inflation forecasts, but its projections from April show that it expects inflation in the Philippines to average 4.3% this year and 3.2% in 2027.

If realized, headline inflation will breach the Bangko Sentral ng Pilipinas’ (BSP) 3% target for two straight years, marking a sharp acceleration. from a reading of 1.7% in 2025.

These, however, are slower than the central bank’s 6.4% and 4.5% interest rates over the next two years.

As of June, inflation in the Philippines stood at 4.8%, with the headline print remaining above target for four consecutive months.

On the other hand, Pantheon Macroeconomics lowered its inflation forecast to 5.2% from 5.5% 2026 and to 3% from 3.2% in 2027.

This came after June inflation came in slower than market expectations at a three-month low of 6.4% amid easing pressure on food and fuel prices.

“We continue to believe that the post-war increase in the rate of headlines is in the rear-view mirror, and that inflation should return to 2-to-4% of the BSP’s target in March of next year, barring any unexpected shocks, external or internal,” Pantheon Macroeconomist Economist in Asia Economist and Asia Economist, Pantheon Macroeconomist and Economist Economist Asia. Gupta said in a separate report on Wednesday.

Mr. Chanco and Ms. Gupta said that inflation may prompt the BSP to ease its tightening by pausing in August.

The Monetary Board began raising its policy rate in April as a first step to contain inflationary risks from the energy crisis.

It delivered the second straight rate hike in June, bringing its total increase to 50 basis points (bps). The benchmark rate now stands at 4.75%.

BSP Governor Eli M. Remolona, ​​Jr. he said the economy could still absorb another 25-bp increase as they expect growth to pick up. repeat in the second half.

“The board is focused on fiscal policies to reduce the impact of high rates on economic growth, in particular, the renewal of public infrastructure spending, after being encouraged by last year’s anti-corruption campaign,” said Mr. Chanco and Ms. Gupta.

“But our chart below highlights that such costs are still deteriorating; it fell in April – the latest data – to its lowest level since the pandemic, after seasonal adjustment,” he added.

The latest government data showed that its spending increased by 4.81% to P2.6 trillion as of May from P2.48 trillion a year ago. This was slower than the 9.71% growth seen during the same period last year.