Marcos gov't cuts 2025 growth outlook on the Philippines

MANILA, Philippines - Headwinds coming from the US tariffs and the war in the Middle East prompted the Marcos administration to temper its growth ambition, highlighting the growing challenges for an economy that’s navigating a difficult external environment.

The interagency Development Budget Coordination Committee (DBCC) lowered the official growth target range for 2025 to between 5.5 and 6.5 percent, from the previous band of 6 to 8 percent.

READ: World Bank cuts 2025 GDP growth outlook on the Philippines to 5.3% from 6.1%

The DBCC is responsible for reviewing and approving the government’s macroeconomic assumptions and fiscal program.

The economic team also tempered its goal for 2026 until the end of President Marcos’ term in 2028—penciling in a growth of between 6 to 7 percent in the medium-term, from the old ambition of 6 to 8 percent.

“The revisions take into account heightened global uncertainties, such as the unforeseen escalation of tensions in the Middle East and the imposition of US tariffs,” the DBCC said in a statement.

“Despite these headwinds, the DBCC remains vigilant and ready to deploy timely and targeted measures to mitigate their potential impact on the Philippine economy,” it added.

The watered-down goals came after the economy grew at a weaker-than-expected pace of 5.4 percent in the first quarter.

Analysts had said the specter of global trade war bruised business confidence. Gross capital formation—the investment component of the gross domestic product—grew by 4 percent in the three months ending in March, slowing down from 5.5 percent in the preceding quarter.

But before the tariff-induced uncertainties could even clear out, the war between Israel and Iran added to risks to the growth outlook.

With economic expansion now targeted to be lower than what the state had previously hoped to achieve, the DBCC also adjusted their fiscal targets.

The budget deficit is now capped at P1.56 trillion, or equivalent to 5.5 percent of the GDP. This is higher than the old deficit limit of 5.3 percent of the GDP.

The revision was due to adjustments in the revenue goal, which has now been slashed to 15.9 percent of GDP from the previous ratio of 16.2 percent. Policymakers typically peg the revenue target of the government to the projected performance of the economy.

At a press conference, Aris Dacanay, economist at HSBC, said the ongoing easing cycle of the Bangko Sentral ng Pilipinas would bode well both for the economy and the fiscal consolidation efforts. He expects the economy to grow by 5.4 percent this year.

“Consumption is improving. Investment is improving because of the policy rate regime, and debt servicing cost has decreased, allowing more consumption,” Dacanay said.

(2025/06/27-02:34)