ECONOMIC MANAGERS reduced its gross domestic product (GDP) expansion goal for this year amidst “escalated global uncertainties” emerging from the Middle East turmoil and US tariffs.
The Philippine economy is now anticipated to grow by 5.5-6.5% this year, down from the earlier target of 6-8%, as stated by the Development Budget Coordination Committee (DBCC) on Thursday.
It also adjusted the GDP growth target range to 6-7% for 2026 to 2028 from a previous estimate of 6-8%, “illustrating a more cautious and resilient perspective amid global challenges.”
“These revisions consider the increased global uncertainties, such as the unexpected rise in tensions in the Middle East and the enforcement of US tariffs,” Budget Secretary Amenah F. Pangandaman, chair of the DBCC, remarked during a briefing.
“Despite these challenges, the DBCC remains alert and prepared to implement timely and focused measures to alleviate their potential effects on the Philippine economy,” she added.
The Philippine economy expanded at a lower-than-expected rate of 5.4% in the first quarter, compared to 5.9% growth a year prior.
Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan indicated GDP must grow by 5.5-6.5% to achieve the lower end of this year’s target.
The DBCC also modified certain macroeconomic assumptions regarding inflation, trade, crude oil, and foreign exchange rates.
The inflation forecast for 2025 was adjusted to 2%-3% from an earlier range of 2%-4%. It maintained the inflation expectation of 2-4% for 2026 to 2028.
In the initial five months, inflation has averaged 1.9%, slightly beneath the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range.
“Inflation will likely remain manageable, benign in the short term. Growth may slow, but stay stable,” BSP Deputy Governor Zeno R. Abenoja remarked during the briefing.
OIL PRICES
The DBCC anticipates Dubai crude oil prices to average $60-$70 for this year up until 2028, down from $60-$80 previously, attributed to “diminishing global demand and anticipated increases in worldwide oil inventories.”
However, Mr. Balisacan cautioned about the possible repercussions of an extended war in the Middle East.
“If those (oil price) increases persist throughout the year, certainly the economy would suffer significantly, as would the economies of the global landscape,” he informed reporters.
Oil prices increased on Thursday after a sharp decline following the announcement of the Israel-Iran ceasefire. Reuters indicated Brent crude futures climbed 0.37% to $67.93 a barrel, while US West Texas Intermediate crude rose 0.45% to $65.21.
Conversely, the foreign exchange rate is expected to “remain steady” and average between P56-P58 per dollar from this year through 2028.
“This is backed by lower domestic inflation and will continue to be influenced by global financial conditions and external trade performance,” the DBCC noted.
SLUGGISH TRADE
Trade is anticipated to be sluggish, reflecting the effects of the Trump administration’s tariff strategy.
“Goods exports are expected to contract by 2% in 2025 (down from a previous estimate of 6% growth), primarily due to slower global demand and increased trade policy uncertainties, before rebounding to a modest growth of 2% from 2026 to 2028,” the DBCC stated.
The DBCC also decreased the goods imports growth outlook to 3.5% this year from 5% previously. Imports are projected to grow by 4% from 2026 to 2028 compared to a previous forecast of 8%, “supported by stable domestic consumption and ongoing infrastructure investment.”
US President Donald J. Trump announced raised reciprocal tariffs on the majority of the country’s trading partners, with Philippine goods facing the second-lowest rate in Southeast Asia at 17%. Nevertheless, the reciprocal tariffs have been paused for 90 days until July 9. A baseline 10% tariff remains applicable.
Special Assistant to the President for Investment and Economic Affairs Frederick D. Go indicated the Philippines is actively negotiating with the US regarding the tariffs, without disclosing further details.
DEFICIT CEILING
Meanwhile, the DBCC now forecasts the budget deficit as a percentage of GDP to expand to 5.5% this year from5.3% previously. It also anticipates the deficit share to increase to 5.3% by 2026 from 4.7% earlier.
The anticipated budget gap as a portion of GDP for 2027 was raised to 4.8% from 4.1% previously, while for 2028, it was updated to 4.3% from 3.7% prior.
“We revised the medium-term fiscal program (MTFP) because when we initially drafted the MTFP, these external factors were not yet considered. For instance, we were already facing a war in Ukraine and Russia, and another conflict in the Middle East along with numerous global uncertainties,” Finance Assistant Secretary Karlo Fermin S. Adriano stated.
Economic managers also suggested a P6.793-trillion national budget for 2026, marking a 7.4% increase from 2025.
“The 2026 National Budget focuses on human capital development by prioritizing investments in high-quality education, healthcare, and workforce enhancement,” the DBCC mentioned. — with contributions from ARAI