Philippine growth may fall below 6% — AMRO

THE Philippines is poised to become the second-fastest growing economy in the region this year, but the US tariff policy may drive gross domestic product (GDP) growth to below 6%, the ASEAN+3 Macroeconomic Research Office (AMRO) said.

“For now, our various scenarios of tariff actions, as per the ‘Liberation Day’ and ‘pause’ scenarios, growth in the Philippines will be negatively affected and likely will fall below 6%,” AMRO Group Head and Principal Economist Allen Ng said at a briefing.

US President Donald J. Trump announced higher reciprocal tariffs on most of its trading partners, with Southeast Asian countries slapped with some of the highest duties. Last week, he suspended the reciprocal tariffs for 90 days but implemented the 10% baseline tariff for all.

The Philippines is still facing US duties of 17% once the suspension is lifted in July, although this is the second lowest among Association of Southeast Asian Nations (ASEAN).

AMRO Chief Economist Hoe Ee Khor said the tariff impact on the Philippines will be “much lower.”

“The Philippines is a service-oriented economy. The manufacturing sector is less important… but it’s a much smaller share of the economy compared with the other ASEAN countries. So, because of that, I think the tariff impact on the Philippines will be much lower,” Mr. Khor said at a virtual briefing on Tuesday.

“We think that the Philippine economy generally will emerge from this tariff war quite well,” he added.

AMRO on Tuesday released its Regional Economic Outlook quarterly update, which includes forecasts finalized prior to Mr. Trump’s announcement of the “Liberation Day” tariffs on April 2.

In the report, the regional think tank said Philippine GDP is projected to expand by 6.3% this year, unchanged from the forecast in January. It is the second-fastest forecast among ASEAN, after Vietnam’s 6.5%.

For 2026, AMRO sees the Philippines growing by 6.3%, the fastest among ASEAN and slightly higher than Vietnam’s 6.2%.

AMRO’s baseline forecasts show Philippine growth will settle above the ASEAN average of 4.7% this year and 2026, driven by “robust domestic demand.”

“Growth is expected to ease in 2025-2026, following the strong export recovery in 2024. Indonesia, the Philippines, Vietnam, and Cambodia are projected to lead growth in the subregion, growing above the ASEAN average,” it said.

AMRO expects ASEAN+3 (including China, Hong Kong, Japan and South Korea) to grow by 4.2% this year and 4.1% in 2026.

“ASEAN+3 is set to remain a key driver of global growth in the medium term. The region is forecast to expand by an average of 4.3% in 2025-2030, outpacing global growth of 3.2%,” it said.

However, more aggressive protectionist policies from the US would hurt the region’s growth.

“The disorderly escalation of trade tension driven by erratic US trade policies could upend the anticipated steady growth path of the region,” it said.

AMRO said it will update the baseline forecasts in the coming months to reflect the impact of the US tariffs.

Weakest growth since COVID

Meanwhile, Mr. Trump’s global tariffs would cut Asia’s economic growth to the weakest since the COVID-19 pandemic, according to AMRO.

If America’s so-called reciprocal levies are implemented, growth across Asia would slow to 3.8% this year and 3.4% next year, AMRO said.

The 2025 estimate includes Mr. Trump’s “Liberation Day” charges on all nations that he subsequently paused, but not the recently announced temporary exemption for certain products including smartphones and electronics.

That forecast compares with a 4.2% baseline without tariffs and would mark the slowest pace of growth since it slumped to 3.3% in 2022.

While some countries may be hit harder given how much they rely on exports to the US — such as Vietnam and Cambodia — the region can mitigate the impact by easing monetary policy and boosting fiscal spending, according to the Singapore-based group.

“They’ll take policy responses to mitigate it,” said Mr. Khor. “The region is pretty resilient because they’ve accumulated reserves over the years and are more flexible in terms of the exchange rate,” he said, adding that inflation is tame, leaving space for central banks to cut policy rates.

Asia is set to be the hardest hit by Mr. Trump’s protectionist push, given the escalating charges on China and how integrated supply chains are across the region. Officials from Vietnam to Japan have been seeking exemptions and promising concessions across meetings with counterparts in the US.

Some central banks have already started cutting interest rates, flagging risks to the growth outlook, including the Reserve Bank of India last week, whose members signaled additional easing in coming months.

Meanwhile, the 145% levies announced this year on China and retaliatory duties on the US mean trade is set to plummet between the two nations.

That impact is likewise “manageable” for China since the nation’s share of exports to the US makes up a shrinking share of domestic GDP, according to AMRO. The bigger risk, meanwhile — that the two economies will fully decouple — isn’t likely, Mr. Khor said. “Decoupling is basically all imports and exports” down to zero, he said. “That’s an extreme scenario that won’t happen.”

If implemented, US tariffs on Asia would rise to an average 26% excluding China, according to AMRO. About 15% of the region’s total exports currently head to the US, accounting for about 4% of GDP. — ARAI with Bloomberg