THE World Bank has kept its economic growth forecasts for the Philippines despite heightened uncertainty arising from the Trump administration’s tariff policies.

In its bi-annual Global Economic Prospects report, the multilateral lender said the Philippine gross domestic product (GDP) is expected to expand by 5.3% this year, 5.4% in 2026 and 5.5% in 2027.

The World Bank’s forecasts were below the government’s 6-8% GDP target range for this year up to 2028.

These were unchanged from the bank’s East Asia and Pacific report released in April.

However, it was lower than the forecasts in the January edition of the Global Economic Prospects report released before Donald J. Trump assumed the US presidency on Jan. 20.

The latest 2025 forecast was 0.8 percentage point (ppt) lower than the 6.1% projection in January, while the 2026 forecast was 0.6% lower than the 5.9% projection in January.

The Philippines’ GDP growth for this year is still one of the fastest among the East Asia and Pacific country forecasts, after Palau’s 8.6%, Mongolia’s 6.3% and Vietnam’s 5.8%, but the same as Samoa’s 5.3%.

For 2026, the Philippines will be the second-fastest in the region after Vietnam’s 6.1%. In 2027, the Philippines is again expected to be the second-fastest growing economy after Vietnam’s 6.4%.

“Growth in East Asia and Pacific (EAP) is projected to slow from 5% in 2024 to 4.5% in 2025, slightly lower than previously expected owing to increases in trade barriers and related policy uncertainty,” the World Bank said.

In April, Mr. Trump announced a 10% tariff on all trading partners as well as higher reciprocal tariffs on others including the Philippines which is facing a 17% rate.

The reciprocal tariffs have been paused for 90 days until July as countries negotiate lower rates with the US.

The World Bank projects EAP growth at 4% for both 2026 and 2027, a tad below the previous forecasts.

“The downgrade reflects the impact of higher tariffs on growth, which is expected to be partly offset by policy support measures in EAP economies, notably China. In many regional economies, the deterioration in the outlook will weigh on the pace of job creation and per capita income catch-up with advanced economies,” it said.

The World Bank said downside risks to the baseline projections have intensified since January.

“Additional shifts in trade policy would likely have large impacts on economies across the region, owing to their high trade openness and links to global production networks. Other downside risks include tighter global financial conditions, substantially weaker growth in major economies, increased geopolitical stress, and natural disasters,” it said.

A partial resolution of trade tensions and a reduction in trade policy uncertainty would likely boost growth in the region above the baseline, the World Bank added.

TRADE COLLAPSE
At the same time, the World Bank on Tuesday slashed its global growth forecast for 2025 by four-tenths of a percentage point to 2.3%, saying that higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies.

The global lender lowered its forecasts for nearly 70% of all economies — including the US, China and Europe, as well as six emerging market regions — from the levels it projected six months ago before Mr. Trump took office.

Mr. Trump has upended global trade with a series of on-again, off-again tariff hikes that have increased the effective US tariff rate from below 3% to the mid-teens — its highest level in almost a century — and triggered retaliation by China and other countries.

The World Bank is the latest body to cut its growth forecast as a result of Mr. Trump’s erratic trade policies, although US officials insist the negative consequences will be offset by a surge in investment and still-to-be approved tax cuts.

It stopped short of forecasting a recession but said global economic growth this year would be the weakest outside of a recession since 2008. By 2027, global gross domestic product growth was expected to average just 2.5%, the slowest pace of any decade since the 1960s.

The report forecast that global trade would grow by 1.8% in 2025, down from 3.4% in 2024 and roughly a third of its 5.9% level in the 2000s. 

The forecast is based on tariffs in effect as of late May, including a 10% US tariff on imports from most countries. It excludes increases that were announced by Mr. Trump in April and then postponed until July 9 to allow for negotiations. 

The World Bank said global inflation was expected to reach 2.9% in 2025, remaining above pre-COVID-19 levels, given tariff increases and tight labor markets.

“Risks to the global outlook remain tilted decidedly to the downside,” it wrote. The lender said its models showed that a further increase of 10 percentage points in average US tariffs, on top of the 10% rate already implemented, and proportional retaliation by other countries, could shave another half of a percentage point off the outlook for 2025.

Such an escalation in trade barriers would result “in global trade seizing up in the second half of this year… accompanied by a widespread collapse in confidence, surging uncertainty and turmoil in financial markets,” the report said.

Nonetheless, it said the risk of a global recession was less than 10%.

‘FOG ON A RUNWAY’
“Uncertainty remains a powerful drag, like fog on a runway. It slows investment and clouds the outlook,” World Bank Deputy Chief Economist Ayhan Kose told Reuters in an interview.

But Mr. Kose said there were signs of increased dialogue on trade that could help dispel uncertainty, and supply chains were adapting to a new global trade map, not collapsing. Global trade growth could modestly rebound in 2026 to 2.4%, and developments in artificial intelligence could also boost growth, he said.

“We think that eventually the uncertainty will decline,” Mr. Kose said. “Once the type of fog we have lifts, the trade engine may start running again, but at a slower pace.”

Mr. Kose said while things could get worse, trade was continuing and China, India and others were still delivering robust growth. Many countries were also discussing new trade partnerships that could pay dividends later, he said.

The World Bank said the global outlook had “deteriorated substantially” since January, mainly due to advanced economies, which are now seen growing by just 1.2%, down half a percentage point, after expanding by 1.7% in 2024. — Reuters with ARAI