The International Monetary Fund (IMF) on Friday, 25 September 2026, cut its forecast for Philippine economic growth this year to 3.4% from the 3.9% it had projected in July, following its annual Article IV review in Manila. IMF mission chief Andrea Pescatori also lowered the 2027 outlook to 5.1% from 5.5%, blaming a weak second quarter, a slow rebound in public investment and oil-driven price pressure, GMA News reported.
The revised 2026 figure now sits below the government’s own lowered target range of 3.5% to 4.5%, according to The Manila Times. For more economy coverage, visit our business hub and Philippines hub.
Key takeaways
- The IMF now sees Philippine GDP growth of 3.4% in 2026 (down from 3.9%) and 5.1% in 2027 (down from 5.5%).
- It raised its 2027 inflation forecast to 4.1% from 3.3%, while trimming 2026 to 5.6% from 5.7%.
- Pescatori said the Fund expects the Bangko Sentral ng Pilipinas (BSP) to deliver one more rate hike this year.
Why the IMF lowered its numbers
Pescatori told reporters that most of the revision came from second-quarter output data, which fell well short of the Fund’s own projection. The economy expanded 2.3% in the April-to-June period, which GMA News described as the weakest reading since the fourth quarter of 2009 if the pandemic years are excluded.
The IMF had also expected state infrastructure spending to bounce back strongly in the second half, lifting business activity with it. Pescatori said that recovery did not happen and is no longer expected to be complete, based on the latest budget figures. Both outlets linked the slow rebound in public spending to the fallout from the flood control corruption scandal.
The government is now leaning more on public-private partnerships (PPPs) to fill the gap, but Pescatori cautioned that these carry execution risks. As a result, the Fund slightly reduced the growth contribution it expects from public investment and PPP projects combined.
A “challenging conjuncture”
“The Philippine economy is facing a challenging conjuncture as commodity-related inflationary pressures compound a growth deceleration,” Pescatori said, as quoted by The Manila Times. He said risks to growth are tilted to the downside.
The main external threats, he said, are a drawn-out Middle East conflict that keeps energy and commodity prices high, tighter global monetary conditions and weaker investment. A softer recovery in public investment and confidence, plus more frequent climate-related events, could also weigh on output. Pescatori added that faster structural and governance reforms would help unlock stronger investment.
Inflation and the BSP
On prices, the IMF trimmed its 2026 inflation forecast to 5.6% from 5.7% but raised its 2027 estimate to 4.1% from 3.3%. Both figures sit above the BSP’s 2% to 4% target range. Pescatori said the upgrade for next year reflects the recent jump in oil prices as well as food costs, and he pointed to the risk that a severe El Niño could hurt farm output.
Rice is the Fund’s biggest worry. Its baseline assumes rice prices climb by 20% to 25%, and because rice makes up about 12% of the consumer basket, that would keep pushing headline inflation higher, he said. Pescatori also warned of a “sharp pass-through” from oil prices in the fourth quarter. “We do expect that there will be an extra hike by the BSP,” he said.
The BSP has raised rates at three straight meetings, by a cumulative 75 basis points, taking its benchmark to 5.0%. Pescatori said the IMF estimates that monetary policy works with a lag of around 12 months, so the hikes already delivered should mostly start to cool inflation next year. The Monetary Board has two policy meetings left in 2026, in October and December, The Manila Times noted in a separate report.
How the IMF compares with other forecasters
The IMF’s move follows a similar downgrade from the Asian Development Bank earlier in the week, which cut its 2026 Philippine growth forecast to 3.3% from 3.8%, according to The Manila Times. For businesses and investors, the message from multilateral lenders is consistent: the economy’s recovery now depends heavily on how fast public spending resumes and how long the oil shock lasts.
