Nomura lowers growth forecast for Philippine to 5.9 percent

MANILA, Philippines — Nomura Global Markets Research has trimmed its 2025 growth forecast for the Philippine economy to 5.9 percent from six percent previously, citing headwinds from global trade tensions and higher US tariffs.

Despite this, gross domestic product (GDP) growth is still expected to pick up slightly from the 5.6 percent recorded in 2024, Nomura analysts Euben Paracuelles and Nabila Amani said in a monthly report.

“Taking into account the impact of the US reciprocal tariffs, we now forecast a more moderate pickup in GDP growth, still led by public investment spending due to the government’s strong push for more progress on infrastructure projects,” they said.

However, the impact of higher tariffs would be more modest compared to peers, while GDP would be supported by strong domestic demand and proactive policy measures.

Robust labor market conditions and a significant pickup in private investment are also seen supporting the economy.

Meanwhile, the Japanese investment house also raised its current account (CA) deficit forecast for the Philippines to 4.1 percent of GDP for 2025 from 3.1 percent. The revision followed a wider-than-expected shortfall in the fourth quarter of 2024.

The country’s CA deficit widened by 41.4 percent to $17.5 billion in 2024 from $12.4 billion in 2023, driven largely by a widening merchandise trade gap. This was equivalent to -3.8 percent of GDP last year from -2.8 percent of GDP in 2023.

For the fourth quarter alone, the country booked a CA deficit of $4.6 billion or -3.5 percent of GDP, nearly five times higher than the $1 billion shortfall or -0.8 percent of GDP a year ago.

Nomura also reduced its inflation outlook. Paracuelles and Amani said they now see average inflation easing to 2.2 percent in 2025 from its previous forecast of 2.7 percent.

“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,” they said.

The research firm now expects the Bangko Sentral ng Pilipinas to cut policy rates by 75 basis points this year, slashing the key rate down to 4.75 percent from the current 5.5 percent level, amid softening inflation and persistent global uncertainties.

Nomura forecasts the Philippines’ fiscal deficit to narrow slightly to 5.5 percent of GDP in 2025 from 5.6 percent in 2024, in line with the government’s medium-term fiscal targets.

However, Paracuelles and Amani flagged risks related to infrastructure spending and the challenge of meeting the three-percent deficit goal by 2028.

They also cautioned that escalating geopolitical tensions and delays in infrastructure rollout may pose downside risks to the outlook.