By Luisa Maria Jacinta C. Jocson, Correspondent
THE PHILIPPINES’ gross domestic product (GDP) is anticipated to quicken this year and in 2026 due to strong domestic demand, according to the United Nations (UN).
In its recent World Economic Situation and Prospects report, the UN indicated it expects the Philippine economy to grow by 6.1% in 2025 and 6.2% in 2026.
“The Philippines stands out as one of the most vigorous growth performers among East Asian economies,” said UN Department of Economic and Social Affairs Economic Affairs Officer Zhenqian Huang in a follow-up email.
“The projected sustained growth is indicative of strong domestic demand, continuous public investments, and the beneficial impacts of recent investment policy reforms, coupled with a dynamic labor market and an expanding services sector.”
The UN’s projections align with the government’s growth target of 6-8% for this year and the following year.
It noted that GDP growth likely averaged 5.6% in 2024, which is below the government’s target range of 6-6.5%.
For 2025, the Philippines is expected to be the second-fastest growing economy in the region, just behind Vietnam (6.5%) and ahead of Cambodia (6%), Malaysia (4.6%), Thailand (3.1%), and Singapore (2.6%).
“In 2025 and 2026, economic expansion in the Philippines is anticipated to be propelled by vigorous investment activity and strong private consumption,” noted Ms. Huang.
“Monetary easing amid declining inflation will bolster domestic demand in the short term,” she added.
The Bangko Sentral ng Pilipinas (BSP) initiated its easing cycle in August, reducing interest rates by a total of 75 basis points (bps) last year, which adjusted the target reverse repurchase rate to 5.75%.
BSP Governor Eli M. Remolona, Jr. has indicated the possibility of further reductions this year, stating that there is “still room to ease.”
The full-year inflation rate settled at 3.2% in 2024, consistent with the BSP’s own estimates.
This also marked the first occasion that annual inflation remained within the central bank’s 2-4% target range since 2021, when the average inflation was 3.9%.
Ms. Huang also highlighted “robust” remittance flows, which will assist in enhancing household expenditures.
The latest figures from the central bank revealed that cash remittances grew by 3% year-on-year to $28.3 billion during the January-October timeframe.
“Despite ongoing fiscal consolidation, enhanced government revenue collection over the past decade has made sustained public investment in essential infrastructure possible to unlock long-term potential,” she stated.
Recent data from the Bureau of the Treasury (BTr) indicated that the National Government’s (NG) budget deficit was P1.18 trillion for the 11-month duration. Revenues surged by 15.16% year-on-year to P4.11 trillion.
“Furthermore, the global demand for AI (artificial intelligence)-related electronic products is anticipated to enhance merchandise trade, while services trade will gain from the ongoing revival in international tourism.”
Conversely, Ms. Huang identified downside risks to the growth outlook.
“Rising trade tensions, including the potential for increased tariffs, could adversely affect merchandise trade performance,” she cautioned.
US President-elect Donald J. Trump, who is about to assume office next week, has vowed to implement a 10% universal tariff as well as a 60% tariff on Chinese products.
“Current account deficits since the end of the pandemic render the economy vulnerable to exchange rate fluctuations, particularly if major developed country central banks undergo unexpected shifts in monetary policy.”
She also emphasized how the nation is susceptible to climate shocks and natural calamities, which may result in “substantial economic and social losses.”
A recent investigation by the Asian Development Bank (ADB) revealed that the Philippines could potentially forfeit 18.1% of its GDP by 2070 due to climate change under a high emissions scenario.
In the meantime, the UN projects that headline inflation will remain stable at 3% this year through to 2026.
“Inflation in the Philippines has been relatively mild and is expected to persist within the central bank’s target range in the near future,” Ms. Huang stated.
This year, the BSP anticipates an average inflation rate of 3.3%. Its risk-adjusted forecast stands at 3.4%.
The decrease in inflation will primarily be driven by softening price pressures on food, she noted.
“While inflation is not currently a significant policy concern, inflationary pressures are likely to persist… Potentially higher tariffs from trading partners, supply chain disruptions, and climate-related disasters could trigger renewed upward pressure on prices,” Ms. Huang cautioned.
