S&P lifts Philippines growth outlook

Another BSP rate cut seen

MANILA, Philippines — S&P Global Ratings has raised its economic growth forecast for the Philippines this year, citing reduced global trade uncertainty following the easing of US-China tariffs, as well as benign inflation that gives the Bangko Sentral ng Pilipinas (BSP) space to resume monetary easing.

In its latest Asia-Pacific Economic Outlook, S&P now expects Philippine gross domestic product (GDP) to expand by 5.9 percent in 2025, up from its earlier projection of 5.7 percent.

However, this is still below the government’s six to eight percent target for the year.

It also sees one more 25-basis-point rate cut by the BSP, bringing the policy rate to five percent by year-end from the current 5.25 percent level.

The credit watcher said that while the broader region faces external headwinds including elevated US tariffs, weak Chinese imports and global uncertainty, economies like the Philippines that are less dependent on exports are better positioned to withstand the drag on growth.

“Domestic demand resilience is particularly relevant in limiting the economic slowdown in economies less exposed to goods exports such as India and the Philippines,” S&P said.

Vincent Conti, senior lead economist at S&P Global Ratings, told The STAR that the forecast upgrade was influenced by recent global developments.

“The upward revision from our forecast published in May was driven by the sharp reduction of bilateral tariffs between the US 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,” Conti said.

“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 added.

The revision reflects expectations that consumer activity in the Philippines will remain healthy, supported by easing inflation and monetary policy accommodation.

S&P forecasts inflation to settle at 2.3 percent this year, well within the BSP’s two to four percent target range.

“Inflation has been below target from March to May, and together with the downside risks to growth from the external front, provides space for BSP to cut rates,” Conti said.

“Despite the inflation risks from geopolitical developments in the Middle East, we expect inflation to fall within target over the next few years given less demand pull on prices,” he said.

The debt watcher also noted that the regional inflation outlook has turned more favorable due to declining energy prices and currency appreciation across Asia, which reduces imported inflation pressures and supports the case for further rate cuts.

“Across the region, redirection of exports away from the US will weigh on price increases,” it said, adding that growth risks now take precedence over inflation concerns in most Asia-Pacific economies.

In the case of the Philippines, S&P’s updated projections reflect confidence in the country’s underlying macroeconomic fundamentals, which it says provide buffers against external shocks.

S&P’s projection aligns with market expectations that the BSP could resume easing in the second half of the year, especially as inflation remains well behaved. However, geopolitical concerns cloud the outlook as risks to inflation could arise.

For the next two years, S&P sees Philippine GDP growth picking up further to six percent in 2026 and 6.6 percent in 2027. It also expects growth to hit 6.5 percent in 2028.