MANILA, Philippines — The Institute of International Finance (IIF) expects the Philippine economy to grow by 5.8 percent next year, higher than the 4.6 percent regional forecast, as it is less exposed to international trade and the slowdown of demand from China.
In its report titled Global APAC Growth and Capital Flow Outlook for 2025, IIF said the gross domestic product (GDP) growth for the Philippines next year would be unchanged from its forecast for 2024.
The growth outlook, however, is lower than the 6.5 to eight percent range the Development Budget Coordination Committee (DBCC) is aiming for in 2025, but is higher than the IIF’s projection of 4.6 percent GDP growth for Asia Pacific and 4.4 percent for emerging Asia in 2025.
“We expect GDP growth for the region to slow down as a whole to an average 4.4 percent in 2025, reflecting the negative impact from a China slowdown and a strong US dollar that tightens external financing conditions. We estimate that the US tariff agenda could drag China’s growth down to 4.2 percent in 2025 from 4.8 percent in 2024, partially offset by policy stimulus,” the IIF said.
It noted that specifically, Malaysia, Korea and Thailand are more exposed to international trade and the slowdown of demand from China, while the Philippines, India and Indonesia are less exposed.
“Countries that are more reliant on dollar financing – such as Malaysia, Korea and Thailand – are likely to face increased pressure from a strong US dollar and “higher for-longer” US Federal Reserve policy rate,” the IIF said.
The report also noted that a weaker economic outlook, a downturn in the manufacturing cycle, and currency volatility are likely to weigh on equity inflows to countries with higher exposure to China, such as Korea, Malaysia and Thailand.
“Meanwhile, India, Indonesia, and the Philippines maintain positive interest rate differentials with the United States and could benefit from their relative resilience to China’s slowdown and portfolio diversification,” the IFF said.
On a global basis, the IIF is projecting GDP growth to decelerate to 2.7 percent in 2025 from 2.9 percent in 2024.
Similarly, the outlook for emerging markets is also slower at 3.8 percent in 2025 from four percent in 2024.
“These projections reflect expectations regarding potential policies by the incoming US administration, including not only trade policies but also broader fiscal and immigration measures, as well as heightened geopolitical risks,” the IFF said.
It added that while these policies have not yet been implemented, their anticipated impact could significantly shape the global economic landscape if realized.
The report also highlights that nonresident capital flows to emerging markets are projected to reach $716 billion in 2025, down from $939 billion in 2024 but higher than $723 billion in 2023.
It emphasized that this weaker outlook reflects heightened uncertainty surrounding trade and geopolitical tensions, slower China growth, as well as a slower Fed rate cut cycle than projected by the financial market only a few months ago.