Countries like the Philippines have been warned to be mindful of shrinking fiscal buffers after years of successive crises, with the International Monetary Fund urging authorities to focus instead on targeted support.
“Over the years, countries have lost buffers. And so they have to be that much more cognizant of the fact that buffers are lower,” said Krishna Srinivasan, director of IMF’s Asia and Pacific Department, during a regional economic briefing.
“For providing support, we keep harping on the point about providing targeted support… because buffers have come down,k we don’t know how long this shock will last,” he added.
He emphasized that this approach is particularly relevant for the Philippines, where public debt remains elevated at around 60 percent of gross domestic product, limiting the government’s ability to sustain wide-ranging subsidies such as fuel aid or tax suspensions.
“Use your buffers in a very efficient way. And that’s what is important for the Philippines,” Srinivasan said.
In its latest World Economic Outlook, the IMF cut its growth projection for the Philippines to 4.1 percent for 2026 from 5.6 percent previously, while maintaining its 5.8 percent forecast for 2027.
Srinivasan said economic momentum entering the year was already weak, weighed down by investor sentiment linked to governance concerns with flood control projects. This was compounded by the impact of the ongoing Middle East conflict, which has driven up global energy prices. He noted that the Philippines is particularly vulnerable due to its dependence on imported fuel.
Despite the near-term slowdown, the IMF expects the Philippine economy to recover in 2027, suggesting that the current drag may be temporary if global conditions stabilize.
Still, he cautioned that uncertainty remains high, particularly given the unpredictable duration and intensity of the geopolitical shock.
Against this backdrop, the IMF reiterated the need for prudent and well-targeted policy responses to protect vulnerable sectors without undermining fiscal sustainability.
Successive crises, along with the uncertainty of future ones, will necessitate the wise use of limited resources, especially for countries with a heavy debt load like the Philippines. The decisions that our government makes will not only impact the targeted beneficiaries, but also our future ability to deal with any other issues that could develop in this new world order where nations are exposed to the threat of wars, tariffs, or natural catastrophes.
Our government has to be ready for any eventuality.*
