Philippines economic growth expected to pick up in 2025

Fitch Ratings projects the Philippine economy to gain momentum over the next two years, supported by monetary easing, robust infrastructure spending and investment-friendly reforms, according to a report by Philippine Star.

In a report, Fitch Ratings analyst Krisjanis Krustins said the debt watcher expects the gross domestic product (GDP) growth of the Philippines to hit 5.9 percent in 2025 and 6.2 percent in 2026.

“Fitch still expects continued strong medium-term GDP growth and gradual fiscal consolidation in the Philippines, as reflected in its ‘BBB’/Stable rating, affirmed in June 2024,” Krustins said.

However, its 2025 forecast falls below the government’s growth target of six to eight percent, while the 2026 projection meets the lower end of the same target range.

“These growth rates are above ‘BBB’ peers, but below pre-pandemic norms, mainly due to continued weakness in private capital formation,” Krustins said.

The country’s GDP grew by 5.2 percent in the fourth quarter, matching the previous quarter’s pace but falling short of market forecasts.

This brought full-year GDP growth to 5.6 percent in 2024, below the government’s growth target of six to 6.5 percent.

Krustins also expects the Philippine government to post a fiscal deficit of 5.7 percent of GDP in 2024, down from 6.2 percent in 2023, with debt at 61.4 percent of GDP.

“We expect debt-to-GDP to decline from 2025 on strong growth and further narrowing of deficits. We expect general government metrics to remain stronger,” he said.

However, the pace of fiscal consolidation is expected to be constrained by political dynamics, particularly with midterm elections scheduled for May 2025. Fitch noted that the country’s political landscape has become more volatile ahead of the elections, with escalating tensions between President Marcos and Vice President Sara Duterte.

Public rifts between their families, particularly involving former president Rodrigo Duterte, could affect investor sentiment and policy continuity, Krustins warned.

Beyond domestic uncertainties, the Philippines also faces risks from shifting US economic and foreign policies.

“Further strengthening of the US dollar from trade protectionism could put further pressure on the Philippine peso and inflation, although weaker global growth and diversion of Chinese exports could offset this to some extent,” Krustins said.

“The Philippines would be vulnerable to a change in US immigration policy, given the importance of remittances for domestic consumption, although these are fairly diversified,” he added.

Despite these risks, the agency emphasized that the country’s economic fundamentals remain sound. Fitch said an upgrade in its sovereign credit rating would require stronger governance, faster debt reduction and sustained economic growth beyond current projections.