IMF urges Phl to prepare buffers vs economic risks

The International Monetary Fund (IMF) warned of heightened downside risks to the Philippine economy and urged authorities to prepare policy responses to potential adverse shocks, citing growing global uncertainty in its 2025 Article IV Consultation staff report.

- By KEISHA TA-ASAN

The IMF said an illustrative downside scenario layers multiple external shocks, including higher tariffs and supply-chain disruptions, higher inflation expectations, higher global sovereign yields, tighter global financial conditions and lower global demand for US assets.

Using its Quarterly Projection Model, the IMF found that the combined shocks would have a significant impact on the economy. At its peak, the output gap would be “reduced by 1.5 percent relative to the baseline, driven by tighter financial conditions and weaker exports.”

Higher sovereign and corporate yields will weigh on public finances and private investment, while corporates in trade-oriented sectors will be hit and the banking system can face higher nonperforming loans.

The report noted that the first two layers of the scenario, in isolation, “may reduce room for easing monetary policy given their persistent nature and impact on inflation expectations amid a growth slowdown.”