CLIMATE-RELATED disasters are already imposing measurable costs on the Philippine economy and are expected to become a much bigger drag on growth and inflation over the long term, according to the International Monetary Fund (IMF).
In its 2025 Article IV Consultation Staff Report, the IMF said typhoons remain the most frequent natural disasters in the country and are causing recurring economic losses estimated at around 0.2 to 0.3 percent of gross domestic product (GDP) each year.
These losses are felt most strongly in agriculture, which is highly exposed to weather disruptions, and they also add pressure on inflation, particularly food prices. The IMF said these effects are already reflected in its baseline economic projections for the Philippines.
“Over the long term, the economic effects of climate shocks and trends are expected to increase, with climate models forecasting more intense typhoons and sea level rise causing economic losses,” the IMF said.
Climate models point to more powerful typhoons and rising sea levels, the IMF said, which could push annual economic losses to as much as 2.0 percent of GDP if no effective adaptation measures are put in place.
The IMF also welcomed the Bangko Sentral ng Pilipinas’ (BSP) efforts to integrate climate risks into its monetary policy framework, saying these initiatives should continue.
IMF staff analysis shows that climate shocks affect the economy through multiple channels, including supply disruptions, weaker demand and changes in inflation expectations. These factors can raise inflation by as much as 0.6 percentage point on an annual basis in a typical year, with the agriculture sector bearing a disproportionate share of the impact and pushing food prices higher.
“While accommodating some of the shocks risks triggering a rise in inflation expectations, tightening monetary policy to keep inflation at target would raise the cost of capital, which can delay reconstruction and pose a greater loss in output,” the IMF said.
Given these tradeoffs, the IMF said the BSP should allow for a temporary rise in inflation following climate shocks, while taking steps to ensure inflation expectations remain well contained.
“A coordinated policy response can help alleviate some of these tradeoffs,” the IMF said.
Source: Climate shocks could continue to weigh on PH growth, inflation
