S&P upgrades 2025 GDP forecast for the Philippines

Strong domestic demand and economic resilience are expected to bolster growth in several Asia countries such as the Philippines despite the impact of United States (US) tariff policies, S&P Global Ratings said in a report by Philippine News Agency.

In a report, the credit rater hiked its 2025 gross domestic product (GDP) forecast for the Philippines to 6.1 percent from 5.9 percent last May.

S&P Global Ratings senior lead economist Vincent Conti attributed this development to “the sharp reduction of bilateral tariffs between U.S. and China, which came after the pause in the country-specific ‘reciprocal’ tariffs by the US.”

“These somewhat reduced the uncertainty around global trade and growth. We nevertheless expect global trade uncertainty to be substantially higher than before January, and that would in turn provide a key headwind for investment in the Philippines,” he said.

Domestic growth in the first quarter this year rose to 5.4 percent from the quarter-ago’s 5.3 percent. Year-ago GDP is 5.9 percent.

In April, the US implemented higher tariff, with levels in some countries such as China hitting more than 100 percent. The following month, US and China agreed to lower the rates.

S&P said this is a welcome development but expects uncertainties to remain and impact global economies.

Another factor seen to be affected is inflation which, in turn, is seen to complicate the monetary policy outlook.

For the Philippines, the credit rater expects domestic inflation to remain within the government's target range of 2-4 percent until 2026. For this year, the forecast is 2.3 percent average, while it is 3.2 percent for next year.

For the central bank’s policy rates, S&P Global eyes the Bangko Sentral ng Pilipinas’ (BSP) target Reverse Repurchase (RRP) to end 2025 at 5 percent and to decline to 4 percent until 2028.

To date, the BSP’s target RRP rate is at 5.25 percent, which is seen to be cut by 25 basis points in the coming months, given the deceleration of the domestic inflation rate, among others.