United Overseas Bank (UOB) has revised its economic growth forecast for the Philippines, downgrading the projected gross domestic product (GDP) growth rate for 2025 from six percent to five percent in its latest quarterly global outlook report.

This adjustment reflects increasing global trade uncertainties and their anticipated impact on domestic economic performance.

The revised forecast indicates that the Philippines' economic growth rate is expected to fall below last year's output of 5.7 percent and also does not meet the government’s target of six to eight percent for the current year.

UOB noted that the first quarter of 2025 saw a year-on-year real GDP expansion of only 5.4 percent.

Projections suggest further deceleration in growth, predicting second-quarter growth at 5.2 percent, third-quarter growth at 4.9 percent, and fourth-quarter growth at 4.6 percent.

UOB warned that the outlook for the latter half of 2025 is closely tied to external factors, particularly the outcomes of trade negotiations between the Philippines and major economies, such as the United States.

The firm highlighted the importance of trade deals before the expiry of a 90-day suspension on US tariffs on July 9, along with the potential implications of the US administration's choices regarding sector-specific tariffs.

Despite the subdued growth forecast, UOB anticipates that domestic consumption could provide essential support.

This is expected through increased national budgetary expenditures, easing inflationary pressures, effective monetary policy transmission, and sustained inflows of cash remittances from overseas workers.

Looking ahead, UOB estimates GDP growth for 2026 at a slightly improved rate of 5.5 percent, although still below the government's targeted growth.

In line with its economic outlook, UOB foresees latitude for the Bangko Sentral ng Pilipinas (BSP) to implement interest rate cuts.

In a report issued on June 13, UOB’s economist, Jasrine Loke, projected a 25-basis-point reduction in the overnight reverse repurchase (RRP) rate from 5.5 percent to 5.25 percent during the BSP's Monetary Board meeting on June 19. This expected monetary easing is supported by low inflation figures recorded in May, with the headline inflation rate dropping to a 5.5-year low of 1.3 percent.

In a report dated May 30, UOB economist Lee Sue Ann asserted that diminishing growth prospects coupled with an improved inflation outlook would likely prompt the BSP to adopt a more accommodative monetary policy.

UOB’s projections include three additional 25-basis-point cuts throughout 2025, aiming for an eventual RRP rate of 4.75 percent by year-end.

Following the anticipated interest rate cuts in 2025, the BSP is expected to maintain its monetary policy stance through at least the first half of 2026.

UOB also revised its full-year inflation forecast for the Philippines for 2025 to two percent, aligning with the lower end of the targeted inflation range.

This change is attributed to various factors, including ongoing non-monetary interventions, decreasing global energy prices, and a stronger local currency.

The report highlighted that the average inflation rate as of May stood at 1.9 percent, with an expected rebound of consumer price index growth above two percent by the fourth quarter of 2025. Nevertheless, the risks associated with impending tariff uncertainties could adversely affect inflation forecasts.

Furthermore, UOB noted the Philippine peso's appreciation against the US dollar by 2.8 percent quarter-on-quarter, which reflects the influence of US tariffs, fiscal conditions, and changes in market confidence towards the US currency.

Early June marked the peso's trading levels as 3.6 percent stronger compared to earlier in the year.

Several factors have contributed to the peso's gains, including lower global oil prices, which may help alleviate balance of payments deficits and contain inflation, as well as political stability following President Ferdinand Marcos Jr.'s Cabinet reshuffle.

Looking ahead, UOB projects that the peso may depreciate to ₱56.5 per US dollar in the third quarter of 2025, before appreciating gradually over the subsequent quarters to ₱55.8 in the fourth quarter and ₱55 in the second quarter of 2026.