Philippines remain a bright spot in Southeast Asia in 2025, 2026

Strong domestic demand, sustained investments in social services and vital public infrastructure, and modest inflation will underpin Philippine economic growth this year and the next, according to a report released by the Asian Development Bank (ADB).

In its flagship Asian Development Outlook (ADO) April 2025 report, ADB forecasts the Philippines’ gross domestic product (GDP) to expand by 6.0% in 2025 and 6.1% in 2026, up from 5.6% growth last year. The Philippines will continue to be one of the fastest growing economies in Southeast Asia.

The growth forecasts were finalized prior to the 2 April announcement of new tariffs by the US administration, so the baseline projections only reflect tariffs that were in place previously. However, ADO April 2025 does feature an analysis of how higher tariffs may affect growth in Asia and the Pacific.

“The Philippines remains a bright spot in the Southeast Asian region, with robust private consumption and sustained investments, particularly on infrastructure, continuing to fuel growth,” said ADB Country Director for the Philippines Pavit Ramachandran.

However, increased uncertainty in global trade and investment policies following the announcement of new US tariffs may impact market sentiment and investment decisions. Geopolitical tensions and weather shocks could also pose challenges, the report said.

ADB forecasts inflation to remain within the government’s target range of 2.0% to 4.0%, averaging 3.0% both in 2025 and 2026. This reflects stable global commodity prices, particularly oil, and a slowdown in rice inflation.

Economic expansion will be fueled by rising employment with the jobless rate at 4.3% in January 2025 against 4.5% in January 2024, which translates to an additional 2.6 million jobs generated within the period. Higher household incomes supported by minimum wage hikes in several regions, remittance inflows from Filipinos overseas, as well as election-related spending ahead of the mid-term elections in May will all help bolster domestic consumption.

More jobs will be created following the easing of foreign ownership restrictions in sectors such as renewable energy, telecommunications, shipping, railways, and expressways, along with sustained government efforts to strengthen industry upskilling, reskilling, and labor market programs.

Public expenditure is expected to rise with the 9.7% increase in the national budget for 2025. A third of the budget will fund social services including national health insurance, education, skills training and livelihood programs, conditional cash transfers, and food vouchers to low-income families. ADB is supporting the Pantawid Pamilyang Pilipino Program under the Expanded Social Assistance Program and is preparing to help finance the Walang Gutom (Zero Hunger) Food Voucher Program.

The government aims to maintain infrastructure spending at 5.0% to 6.0% of GDP over the medium term, with the average infrastructure spending at 5.8% of GDP from 2022 to 2024. To ensure efficient project implementation, a flagship project management office has been established to oversee large-scale transportation projects. These projects include the ADB-financed Malolos Clark Railway Project and the South Commuter Railway Project, which will link Metro Manila to northern and southern provinces in the Luzon region, and the Bataan-Cavite Interlink Bridge Project, which is expected to be one of the world’s longest bridges when constructed.

ADB is a leading multilateral development bank supporting sustainable, inclusive, and resilient growth across Asia and the Pacific. Working with its members and partners to solve complex challenges together, ADB harnesses innovative financial tools and strategic partnerships to transform lives, build quality infrastructure, and safeguard our planet. Founded in 1966, ADB is owned by 69 members—49 from the region.