LOWER-THAN-EXPECTED first-quarter economic growth has prompted analysts to reiterate forecasts of another below-target year for the Philippines.
BMI Country Risk & Industry Research, which recently slashed its forecast for the country to 5.4 percent from 6.3 percent, said it was maintaining the projection “for now.”
“While the latest growth figures pose some downside risk to our full-year forecast, we still think that the economy will achieve a growth rate slightly above 5.0 percent despite the backdrop of escalating trade tensions and slowing global demand,” the Fitch Solutions unit said.
“However, growth will be nowhere close to the 6.4 percent it typically manages.”
An accompanying table to the BMI commentary titled “Growth to Stagnate” plotted flat growth for the rest of the year.
Maybank Securities Inc., meanwhile, which has a higher outlook of 5.8 percent for 2025, said the forecast was “under review” amid global trade uncertainties and swings in government spending.
The projection was also recently trimmed from 6.0 percent following US President Donald Trump’s April 2 announcement of a 17-percent reciprocal tariff against the Philippines.
First-quarter gross domestic product (GDP) growth came in at 5.4 percent, below the 5.8-percent median forecast in a Manila Times poll of analysts. While slightly higher than the 5.3 percent recorded in the last three months of 2024, it was lower than the 5.9 percent seen a year earlier.
Both BMI and Maybank’s 2025 forecasts fall below the government’s 6.0- to 8.0-percent GDP growth target. Last year’s 5.7-percent result missed the 6.0- to 6.5-percent goal and the 5.5 percent seen in 2023 also fell below the target of 6.0 to 7.0 percent.
Trade uncertainty threat
BMI said that the external sector would pose the biggest headwind to Philippine economic growth despite “some bright spots” in the area of consumer and state spending.
“Amid US President Donald Trump’s tariffs and a weak global demand outlook, we expect exports to slow sharply over the coming quarters,” it said.
While exports rebounded in the first quarter, this was said to be mostly due to front-loading by companies seeking to stockpile inventory ahead of Trump’s tariffs.
Slowing inflation, on the other hand, will likely lift household spending, and BMI also said that government consumption would have continued into the second quarter in light of the May midterm elections.
The Fitch Solution company said that it subsequently expects the budget deficit to widen to 6.2 percent of GDP from 5.7 percent last year.
Meanwhile, continued interest rate cuts by the Bangko Sentral ng Pilipinas — BMI expects another 75 basis points — will likely sustain an acceleration in investment activity.
Maybank also pointed to resilient domestic demand but said the boost from election-related spending would likely lead to a tapering in government expenditures.
“On an annual basis, we estimate that midterm election spending will reduce government consumption growth by approximately 2 percentage points,” it said.
“Clouds of uncertainty over trade negotiations with the US on the 17 percent reciprocal tariff on Philippines’ exports remains,” it added.
“Softer trade activities will linger given weaker global trade outlook, impacting net external demand, though the Philippines’ delegation expressed optimism following initial discussions with US trade representatives on 2 May 2025, with aims to reduce the tariff rate to zero.”