IMF Staff Completes 2025 Article IV Consultation with the Philippines

IMF News, October 1, 2025

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Growth is expected to be "5.4 percent in 2025" and to accelerate to "5.7 percent in 2026".
Inflation is projected to average "1.6 percent in 2025" and to "stay around the mid-point of the BSP’s target band in 2026".
Core inflation is expected to be "2.5 percent in 2026", consistent with a slightly negative output gap.
The current account deficit is projected to "narrow modestly over the medium term".
Risks to the growth outlook are described as "tilted to the downside", with main external risks including prolonged global trade policy uncertainty, geopolitical tensions, and disruptive financial market corrections.

The Bangko Sentral ng Pilipinas (BSP) monetary policy tightening and lower rice tariffs have "successfully brought back inflation within the target band."
Staff view: "There is room to further ease monetary policy given the favorable inflation outlook and elevated growth risks."
Policy recommendations:
- The BSP has room for a "slightly more accommodative stance" to help bring inflation back to target faster and reduce economic slack.
- Policy should remain "data dependent" given uncertainties around the output gap and the neutral rate, and two-sided inflation risks.
- The exchange rate should "continue to play its role as a shock absorber amid rising global volatility."
- Continue efforts to incorporate climate considerations in monetary policy.
- Continue reforms to deepen capital markets and enhance monetary policy transmission.

2025 featured "substantial expenditure restraint"; the 2026 budget targets a "broadly neutral fiscal stance".
Medium-term guidance: "More gradual medium-term fiscal consolidation is appropriate" to replenish fiscal buffers and support external balance.
Policy recommendations:
- Implement "concrete and durable tax measures" to limit the need for restraint in priority spending that disproportionately impacts the vulnerable.
- Strengthen budget credibility by enhancing public financial management, including "strengthening investment planning, and project appraisal, selection, management, and procurement to enhance accountability."

Overall systemic financial risks remain "moderate"; the banking system has "strong capital and liquidity buffers."
Vulnerabilities to monitor: real estate sector, strong bank interconnectedness with complex conglomerate structures, and fast-growing consumer credit.
Recommendations:
- Enhance the macroprudential policy framework to preempt buildup of vulnerabilities and raise buffers.
- Continue progress to strengthen crisis management and resolution frameworks.

Upside growth potential exists from accelerated implementation of structural and governance reforms that would support investor confidence and raise potential growth.
Recommended reforms and priorities:
- Continue implementation of recent measures to reduce infrastructure gaps and promote foreign direct investment; effective implementation is "key to reaping their benefits."
- Negotiate and implement deep trade agreements and take steps to lower non-tariff barriers to enhance global value chain integration and resilience.
- Enhance fiscal governance and the rule of law and reduce corruption vulnerabilities for inclusive and sustainable growth.
- Complement reforms by strengthening social protection programs, promoting digitalization, and increasing resilience to climate shocks and natural disasters.
- Continue efforts to incorporate climate considerations into policy frameworks.

An IMF team led by Ms. Elif Arbatli Saxegaard met in Manila "from September 18 to October 1, 2025" for the 2025 Article IV Consultation.
The statement reflects the "preliminary findings" of the mission; staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
Press Release No. "25/322".

IMF Communications Department — October 1, 2025