Philippines may grow below 6% amid US tariff policy

Analysts have lowered their gross domestic product (GDP) growth forecast for the Philippines this year, amid the US government’s flip-flopping trade policies.

In a recent report, Nomura Global Markets Research trimmed its GDP forecast to 5.9% for this year from 6% previously.

“Taking into account the impact of the US reciprocal tariffs, we now forecast a more moderate pickup in GDP growth to 5.9% year on year in 2025 from 5.6% in 2024,” Nomura analysts Euben Paracuelles and Nabila Amani said.

This would be a tad below the Development Budget Coordination Committee’s  6-8% target band for 2025.

First-quarter GDP data will be released on May 8.

Nomura said it revised its growth forecasts after US President Donald J. Trump announced the order to impose reciprocal tariffs on April 2.

Data from Nomura showed the scenarios by which countries in Asia could be affected by varying tariffs.

Under a “bad scenario” or if reciprocal tariffs proceed as planned, including the 125% tariff on China, the export value at risk for the Philippines is 0.5% of GDP.

In a “good scenario” or if only the baseline 10% tariffs are implemented, as well as China’s 125% duty, the Philippines’ export value at risk from tariffs is at 0.4% of GDP.

On April 9, Mr. Trump suspended the implementation of the higher reciprocal tariffs for 90 days. The 125% tariff on China as well as the baseline 10% rate is still in effect.

In a separate report, ANZ Research also slashed its growth forecast for the Philippines due to the potential impact from tariffs.

If reciprocal tariffs go ahead, ANZ said GDP could grow as slow as 5.2% this year, much lower than its current 5.7% forecast.

“We expect the April 2 tariffs would have a variable degree of impact across Asian economies,” it said.

ANZ said it will also likely revisit its forecasts once there is clearer guidance on the United States’ tariff orders.

“Risks to growth are still to the downside even if the final tariffs are retained at 10%. The rate will still be higher than implied by existing differences in bilateral tariffs,” it said.

“We do not think that Asian exporters can benefit from the 90-day window as US imports had already surged ahead of the April 2 tariff announcements. More importantly, Asian governments would not want to risk a further widening of trade surplus with the US in the event it hampers a constructive trade deal.”

On the other hand, Nomura said growth this year will be driven by public investment spending due to the “government’s strong push for more progress on infrastructure projects, with an added short-run impetus from the midterm elections.”

“This should continue to crowd in private investment, while inflation remains benign, boosting household purchasing power, alongside robust labor market conditions.”

‘Downside surprises’

Meanwhile, Nomura also lowered its Philippine inflation forecast to 2.2% this year from 2.7% earlier.

These forecasts take into account “downside surprises,” Nomura said, citing the sharply slower inflation in March to 1.8%.

“The output gap remains negative, and the impact of lower rice import tariffs on food inflation, in addition to more supply-side measures from the government, should keep inflation in check,” it added.

ANZ expects inflation to settle at 2.9% this year accounting for tariff impacts. Without tariffs, inflation could average 3.4%.

“Unlike the likely inflation dynamics in the US, we think that disinflation will intensify in all economies,” it said.

“The stipulated tariffs represent a material demand shock that will lead to a loss of corporate pricing power and wage growth. Furthermore, cheaper imports from mainland China will accentuate downward pressure on prices.”

The Bangko Sentral ng Pilipinas (BSP) expects inflation to settle at 2.3% this year and 3.3% in 2026. — Luisa Maria Jacinta C. Jocson