By Luisa Maria Jacinta C. Jocson, <\/b>Correspondent <\/i><\/p>\n
THE PHILIPPINES’ gross domestic <\/span>product (GDP) is anticipated to quicken this year and in 2026 due to strong domestic demand, according to the United Nations (UN).<\/span><\/p>\n 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.<\/p>\n \u201cThe Philippines stands out as one of the most vigorous growth performers among East Asian economies,\u201d said UN Department of Economic and Social Affairs Economic Affairs Officer Zhenqian Huang in a follow-up email.<\/span><\/p>\n \u201cThe 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.\u201d<\/p>\n The UN’s projections align with the government’s growth target of 6-8% for this year and the following year.<\/p>\n It noted that GDP growth likely averaged 5.6% in 2024, which is below the government’s target range of 6-6.5%.<\/p>\n 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%).<\/p>\n \u201cIn 2025 and 2026, economic expansion in the Philippines is anticipated to be propelled by vigorous investment activity and strong private consumption,\u201d noted Ms. Huang.<\/span><\/p>\n \u201cMonetary easing amid declining inflation will bolster domestic demand in the short term,\u201d she added.<\/p>\n 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%.<\/p>\n BSP Governor Eli M. Remolona, Jr. has indicated the possibility of further reductions this year, stating that there is \u201cstill room to ease.\u201d<\/p>\n The full-year inflation rate settled at 3.2% in 2024, consistent with the BSP\u2019s own estimates.<\/p>\n This also marked the first occasion that annual inflation remained within the central bank\u2019s 2-4% target range since 2021, when the average inflation was 3.9%.<\/span><\/p>\n Ms. Huang also highlighted \u201crobust\u201d remittance flows, which will assist in enhancing household expenditures.<\/p>\n 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.<\/p>\n \u201cDespite 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,\u201d she stated.<\/p>\n 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.<\/p>\n \u201cFurthermore, 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.\u201d<\/span><\/p>\n Conversely, Ms. Huang identified downside risks to the growth outlook.<\/p>\n \u201cRising trade tensions, including the potential for increased tariffs, could adversely affect merchandise trade performance,\u201d she cautioned.<\/p>\n 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.<\/p>\n \u201cCurrent 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.\u201d<\/p>\n She also emphasized how the nation is susceptible to climate shocks and natural calamities, which may result in \u201csubstantial economic and social losses.\u201d<\/p>\n 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.<\/p>\n In the meantime, the UN projects that headline inflation will remain stable at 3% this year through to 2026.<\/p>\n \u201cInflation in the Philippines has been relatively mild and is expected to persist within the central bank\u2019s target range in the near future,\u201d Ms. Huang stated.<\/p>\n This year, the BSP anticipates an average inflation rate of 3.3%. Its risk-adjusted forecast stands at 3.4%.<\/p>\n The decrease in inflation will primarily be driven by softening price pressures on food, she noted.<\/p>\n \u201cWhile 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,\u201d Ms. Huang cautioned.<\/p>\n