THE Philippines’ growth outlook is expected to become more challenging in the second half following a below-expectations first quarter, HSBC said, but the full-year expansion will be the fastest in Southeast Asia.
January-March growth of 5.4 percent — marginally higher than the 5.3 percent seen three months earlier but lower than the 5.8 percent median in a Manila Times poll — fell short of the 2025 goal of 6.0-8.0 percent.
HSBC, which had forecast a 6.0-percent result, noted that the economy had underperformed due to an exports slowdown and despite improved household consumption and government spending due to the midterm elections.
The bank, which recently lowered the 2025 outlook for the Philippines to 5.6 percent from 5.9 percent due to the likely im-pact of unilateral tariffs announced by US President Donald Trump, said “we think the upcoming headwinds will be tough.”
“We expect growth in the Philippines to weaken further in the second half of 2025 as trade uncertainties and challenges put a drag on the global economy,” it added. “Goods exports will likely slow down as tariffs cascade throughout the globe.”
Still, “at 5.6 percent, we expect growth in the Philippines to still be the fastest in Asean (Association of Southeast Asian Nations) in 2025.”
The country is now expected to outpace Vietnam, the erstwhile frontrunner that has has been slapped a 46-percent duty compared to the Philippines’ 17 percent, which is now seen growing by just over 5.0 percent instead of around 6.5 percent.
Southeast Asian neighbors such as Indonesia and Malaysia have also had their growth outlooks cut to the low to mid-4.0 percent level, while Singapore and Thailand — previously seen expanding around 2.5 percent — are now expected to grow below 2.0 percent.
HSBC expects the Philippines to again outpace Vietnam next year and continue leading regional growth, albeit with the expansion at just below 6.0 percent — the bottom end of the government’s 6.0- to 8.0-percent goal to 2028.
Continued below-target growth will prompt the Bangko Sentral ng Pilipinas (BSP) to keep lowering key interest rates, HSBC said.
It expects the benchmark rate, currently at 5.5 percent after a 25-basis point rate cut last April 10, to end the year at 5.0 per-cent to support growth regardless of whether the US Federal Reserve decides to keep pausing or resume easing.
It noted that the BSP had signalled a willingness to cut to 4.75 percent, and said that the likelihood of a further reduction in June had risen.
The central bank’s policymaking Monetary Board will next meet on June 19. The Fed, meanwhile, paused anew last week, citing increased risks to inflation and unemployment.
BSP Governor Eli Remolona last month flagged the possibility of further rate cuts, to be done via “baby steps” and with monetary authorities remaining data-dependent in deciding policy.
“[R]elative to other Asean economies, the Philippines will be relatively better off,” HSBC said.
“The economy’s limited trade exposure is already a given. But its domestic levers are also robust,” it added.
“The Philippines can easily bolster its domestic economy to make up for the slack in trade. And it is geared to do so through monetary policy.”
A reserve requirement ratio cut that took effect in March will make easing “punchier when it comes to boosting growth,” HSBC said, adding that the risks are “tilted towards more” than the 50 basis points of rate cuts it currently expects moving forward.
“Furthermore, the country’s ongoing public infrastructure agenda will likely deliver a high multiplier effect to the economy given the nature of capital formation.”