Manila: Strong domestic demand and economic resilience are expected to bolster growth in several Asian countries such as the Philippines despite the impact of United States tariff policies, S and P Global Ratings said Tuesday. In a report, the credit rater hiked its 2025 gross domestic product (GDP) forecast for the Philippines to 6.1 percent from 5.9 percent last May.
According to Philippines News Agency, S and P Global Ratings senior lead economist Vincent Conti attributed this development to the sharp reduction of bilateral tariffs between the U.S. and China, which followed a pause in the country-specific 'reciprocal' tariffs by the US. These changes have somewhat reduced the uncertainty around global trade and growth. However, Conti noted that global trade uncertainty is expected to remain significantly higher than before January, posing a key headwind for investment in the Philippines.
Domestic growth in the first quarter of this year rose to 5.4 percent from the previous quarter's 5.3 percent, with the year-ago GDP at 5.9 percent. In April, the US implemented higher tariffs, with levels in some countries, such as China, reaching more than 100 percent. The following month, the US and China agreed to lower these rates. S and P described this as a welcome development but anticipates that uncertainties will persist, impacting global economies.
Another factor expected to be affected is inflation, which could complicate the monetary policy outlook. For the Philippines, S and P forecasts domestic inflation to remain within the government's target range of 2-4 percent until 2026. The forecast for this year is an average of 2.3 percent, while it is 3.2 percent for next year.
Regarding the central bank's policy rates, S and P Global anticipates that the Bangko Sentral ng Pilipinas' (BSP) target Reverse Repurchase (RRP) rate will end 2025 at 5 percent and decline to 4 percent until 2028. Currently, the BSP's target RRP rate is at 5.25 percent, which is expected to be cut by 25 basis points in the coming months, considering the deceleration of the domestic inflation rate, among other factors.
