THE PHILIPPINE ECONOMY may expand slower until next year as global uncertainties and the local corruption controversy continue to drag growth, the International Monetary Fund (IMF) said.   

In its latest World Economic Outlook (WEO) released on Monday, the IMF said it expects Philippine gross domestic product (GDP) to grow by 5.6% this year, within the government’s 5%-6% goal.

This is the same projection given following its Article IV Consultation with the country last December, but slightly lower than its 5.7% estimate in the previous WEO.

At the same time, the IMF cut its Philippine GDP growth forecast for 2027 to 5.8% from its 6% projection in October. This also falls within the government’s 5.5%-6.5% target.

“The downward revision in GDP growth projections for 2026 and 2027 reflects the carryover impact from a downward revision in the IMF’s growth forecast for 2025 — from 5.4% to 5.1% — and a slower pace of capital accumulation,” an IMF spokesperson said in an e-mail.

For 2025, the multilateral lender expected Philippine GDP to grow by 5.1%, unchanged from December forecast. However, this is below its 5.4% forecast given in October.

This came after the flood control corruption mess led to slower economic growth and government spending. In the third quarter, GDP grew by 4% — the weakest growth in over four years. This brought year-to-date GDP growth to 5%.

The IMF said that climate shocks in the latter half of the year also contributed to the economic slowdown.

“The downward revision for 2025 in turn reflects a sharper-than-expected slowdown in Q3 amid recent corruption allegations and climate shocks impacting economic activity in the second half of the year,” it said.

In 2025, the Philippines encountered 23 tropical cyclones, affecting millions of Filipinos and leaving billions of pesos in damages nationwide, according to data from the state weather bureau.

The IMF earlier said that weather disruptions have trimmed the country’s GDP by 0.2%-0.3% yearly and accelerated inflation by up to 0.6 percentage point annually.

The multilateral lender said that lingering uncertainty over tighter trade restrictions, geopolitical tensions, and disruptive financial market corrections could dampen the country’s economic growth.

“On the upside, accelerated implementation of structural and governance reforms can boost investment and FDI (foreign direct investment), increase fiscal multipliers and boost potential growth,” it added.

Meanwhile, the IMF forecasts 6% GDP growth for the Philippines in 2028, at the low end of the government’s 6%-7% target.

“Economic growth will be driven by robust consumption and higher investment, supported by monetary policy easing and the authorities’ recent policy initiatives to support private investment,” the IMF said.

The Bangko Sentral ng Pilipinas (BSP) has been on an easing path since August 2024, having delivered a total of 200 basis points (bps) in cuts.

In October and December last year, it slashed the key policy rate by 25 bps each in a move to spur domestic demand amid waning consumer and investor sentiment due to the flood control mess.

The benchmark interest rate now stands at an over three-year low of 4.5%, which the central bank said is already close to their ideal rate, signaling an end to its current easing cycle.

BSP Governor Eli M. Remolona, Jr. has left the door open to another 25-bp cut at their Feb. 19 review but said that further easing may be unlikely considering current economic data.

Still, he noted that a weaker-than-expected growth may prompt them to deliver two rate cuts this year to help stimulate the economy. — Katherine K. Chan

By Katherine K. Chan, Reporter

THE PHILIPPINES’ debt service on foreign loans went down by about 23% year on year at end-October as principal and interest payments fell, the Bangko Sentral ng Pilipinas (BSP) reported.

Based on preliminary central bank data, the foreign debt service bill declined by 22.94% to $11.02 billion in the 10-month period from $14.3 billion a year ago.

October marked the fifth straight month that the country’s external debt service burden fell on an annual basis.

This came as principal payments plunged by an annual 41.04% to $4.513 billion at end-October from $7.654 billion a year ago.

Meanwhile, interest payments stood at $6.507 billion at end-October, slipping by 2.09% from $6.646 billion in the previous year.

“(This was) largely due to lower foreign debt maturities, as well as reduced share of foreign borrowings in the National Government’s (NG) borrowing mix in the total borrowing mix in recent years to better manage forex (foreign exchange) risks entailed in external borrowings,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

In 2025, the NG sought to borrow 81% or P2.11 trillion of its P2.6-trillion financing from local lenders. It previously observed a 75:25 borrowing mix in 2024 in favor of domestic creditors.

The debt service bill represents principal and interest payments after rescheduling, according to the BSP.

This includes principal and interest payments on fixed medium- and long-term credits, including International Monetary Fund credits, loans covered by the Paris Club and commercial bank rescheduling, and New Money Facilities.

It also covers interest payments on fixed and revolving short-term liabilities of banks and nonbanks.

However, the debt service data exclude prepayments on future years’ maturities of foreign loans and principal payments on fixed and revolving short-term liabilities of banks and nonbanks.

At end-October, the external debt service burden as a share of gross domestic product (GDP) stood at 2.9%, lower than the 3.9% from the previous year.

“We’re seeing the external debt service burden ease because borrowers — both public and private — managed to refinance more smartly as global rates stabilized, reducing the amount of high‑cost foreign obligations falling due this year,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said via Viber.

Mr. Ricafort also noted that the US Federal Reserve’s recent rate cuts lowered interest payments on foreign debts.

The Fed has so far lowered key borrowing costs by 175 basis points since September 2024, bringing its policy rate to the 3.5%-3.75% range.

BSP data also showed that the country’s outstanding external debt rose to its highest yet at $149.093 billion as of September, up by 6.77% from $139.643 billion a year ago.

This topped the previous record of $148.873 billion seen in the second quarter.

As of end-September, the external debt-to-GDP ratio came in at 30.9% from 30.6% in the comparable year-ago period.

The BSP’s external debt data cover borrowings of Philippine residents from nonresident creditors, regardless of sector, maturity, creditor type, debt instruments or currency denomination.

The central bank gathers data on external debt through reports submitted by borrowers, banks, and major foreign creditors.

“Going forward, risk of forex losses would still lead to a tempered approach in increasing foreign borrowings to finance the budget deficit,” Mr. Ricafort said.

“Continued or wider budget deficits would lead to higher programmed foreign commercial borrowings of the National Government, as signaled a few weeks ago,” he added.

The National Government’s budget deficit fell by 26.02% year on year in November to P157.6 billion, reversing from the P11.2-billion surplus in October, according to Treasury data.

In the 11-month period, the fiscal deficit widened to P1.26 trillion from P1.18 billion a year ago.

Meanwhile, Mr. Ravelas said debt servicing on external borrowings may continue to decline until yearend due to elevated base effects from 2024 and smoother maturity schedule last year.

“Given the high base (in 2024) and the smoother maturity schedule (in 2025), the year‑on‑year decline will likely continue in the last two months unless there’s a sudden spike in global rates or a sharp peso slide,” he said. “For now, the trend points to improving the breathing room on the external front.”