BMI, a unit of Fitch Solutions Company, is maintaining its 5.4 percent growth forecast for the Philippines in 2025, despite the impact of US tariff policies on export expansion.
In an Aug. 25 commentary released Tuesday, BMI noted that “monthly data show that external sector has remained resilient amid global trade uncertainty.”
For one, exports increased by 15.1 percent on an annual basis in May, the largest jump so far this year, ahead of the supposed imposition of the 20 percent tariff for exports to the US on Aug. 1.
However, the tariff rate was reduced to 19 percent following the official visit of President Ferdinand R. Marcos Jr. to the US in July to negotiate on the rate and strengthen ties.
This reduction is seen to “lead to a 0.4 pp (percentage point) reduction in output over the medium term,” which is way better than the projected 1.4 pp decline estimated in April.
The commentary said delays in implementing the new tariff rate, originally set for Aug. 1 but extended to Aug. 7, “have allowed businesses to front-load shipments.”
It, however, said that “unless another delay is announced, we expect a sharp slowdown in the coming months.”
Amid the forecast hit of the US tariff on the Philippine economy’s overall growth this year, BMI said it is maintaining its growth projection, which, on the other hand, is lower than the downwardly revised 5.5 percent to 6.5 percent target announced by economic managers in June.
The previous growth target ranges from 6 percent to 8 percent, changed due to the possible impact of global economic and geopolitical developments.
Average growth in the first half of the year stood at 5.4 percent, with the second quarter rising to 5.5 percent from the previous three months’ 5.4 percent.
BMI said it is keeping its growth projection for the Philippines this year because of expectations that “global economic conditions will deteriorate in H2,” once the US tariff is in place, and given the fact that the country is “largely (a) domestically driven economy.”
“While interest rates have eased considerably from their peak, erratic US trade policies will weigh on global investor sentiment and limit foreign direct investment inflows. As such, we see little prospect for a meaningful investment recovery in the near term,” it added.
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