The Philippines is expected to continue running a significant current account deficit this year, indicating persistent reliance on foreign capital to fund domestic spending, according to the International Monetary Fund’s (IMF) latest World Economic Outlook.
The current account deficit is projected to reach 3.8 percent of GDP in 2025, a slight improvement from last year’s 4 percent shortfall but still reflective of the economy spending more than it earns from trade and investment with the rest of the world. The IMF expects the gap to narrow further to 3.5 percent of GDP in 2026, yet the continued shortfall implies further borrowing and vulnerability to external shocks.
Despite a robust second quarter GDP growth of 5.5 percent year-on-year—driven by stronger household spending and modest export gains—annual growth for 2025 is forecast to slow to 5.4 percent, down from 5.7 percent last year. This cooling reflects weaker government spending, dampened fixed investments, and slower industrial activity. The economy is, however, expected to regain momentum in 2026 with growth returning to 5.7 percent, the IMF said.
Inflation is projected to ease sharply to 1.6 percent in 2025 from 3.2 percent last year, providing some relief to consumers and policymakers. Still, inflation is seen rising moderately to 2.6 percent in 2026. The September reading of 1.7 percent marks the highest monthly inflation since March, amid upticks in food and transport prices, but remains below market expectations.
On the labor front, the unemployment rate is expected to edge slightly higher to 3.9 percent in 2025 from 3.8 percent last year, and remain at that level into 2026. While still low by historical standards, the uptick reflects the economy’s struggle to sustain strong job creation amid slower growth.
With persistent current account deficits and a moderate growth outlook, the Philippines faces the challenge of balancing its external position while ensuring inclusive and sustained economic expansion, analysts said.
