Dark clouds ahead

PHILIPPINES - In Brief 02 Oct 2025 by Diwa Guinigundo

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Earlier assessments suggested that the post-pandemic slowdown in gross domestic capital formation (GDCF) could be constraining the Philippines’ productivity growth and long-term potential output. The latest data support this concern: from the first half of 2024 to the first half of 2025, GDCF growth fell from 6.6% to just 2.4%. With capital formation moderating, the economy risks losing one of its most reliable drivers of expansion. At the same time, global trade volatility has dampened exports, while imports continue to grow, widening external imbalances. The International Monetary Fund’s (IMF) recent Article IV consultation underscores this weakening trajectory. The Fund revised its growth forecast for the Philippines to 5.4% in 2025, down from 5.5% in July and slightly below the lower bound of the government’s 5.5%–6.0% target. For 2026, the forecast was trimmed to 5.7% from 5.9%, again below the official target of 6.0%–7.0%. While the downgrade may appear marginal, the direction of revision signals caution: growth prospects are weakening even before the full weight of global and domestic risks is felt. The IMF attributes this more conservative outlook to several downside risks: persistent global trade uncertainty, geopolitical tensions that could disrupt supply chains and capital flows, and the potential for abrupt financial market corrections. Although the Philippine economy remains broadly resilient, its performance in the first half of 2025 fell short of expectations. The IMF stresses that sustained policy discipline and structural reforms are essential to bolster competitiveness, attract investment, and support growth over the medium term. Near-term indicators ...