Philippines to post strong growth Until 2026, says UN

The Philippine economy is expected to post faster growth in 2025 and 2026 amid strong domestic demand, the United Nations (UN) said.

In its latest World Economic Situation and Prospects report, the UN said it expects the Philippine economy to expand by 6.1% in 2025 and 6.2% in 2026.

"The Philippines is one of the strongest growth performers among East Asian economies," Zhenqian Huang, an Economic Affairs Officer at the UN Department of Economic and Social Affairs, said in a report by BusinessWorld.

"The anticipated sustained growth reflects robust domestic demand, ongoing public investments, and the positive effects of recent investment policy reforms, along with a vibrant labor market and a growing services sector."

The UN's forecasts are both within the government's 6-8% growth target for this year and the next.

It noted that GDP growth likely averaged 5.6% in 2024, below the government's 6-6.5% target.

For 2025, the Philippines is projected to be the second-fastest growing economy in the region, just after Vietnam (6.5%) and ahead of Cambodia (6%), Malaysia (4.6%), Thailand (3.1%) and Singapore (2.6%).

"In 2025 and 2026, economic growth in the Philippines is expected to be fueled by strong investment activity and robust private consumption," Huang said.

"Monetary easing amid lower inflation will support domestic demand in the near term," she added.

The Bangko Sentral ng Pilipinas (BSP) began its easing cycle in August, cutting interest rates by a total of 75 basis points (bps) last year. This brought the target reverse repurchase rate to 5.75%.

BSP Governor Eli M. Remolona, Jr. has signaled further cuts this year, citing that there is "still room to ease."

Full-year inflation settled at 3.2% in 2024, in line with the BSP's own forecast.

It also marked the first time that annual inflation fell within the central bank's 2-4% target since 2021, when inflation averaged 3.9%.

Huang also noted "robust" remittance flows, which will help boost household spending.

Latest data from the central bank showed that cash remittances grew by 3% year on year to $28.3 billion in the January-October period.

"Despite ongoing fiscal consolidation, improved government revenue collection over the past decade has enabled sustained public spending on essential infrastructure to unlock long-term potential," she said.

Latest data from the Bureau of the Treasury (BTr) showed the National Government's (NG) budget deficit stood at 1.18 trillion pesos in the 11-month period. Revenues jumped by 15.16% year on year to 4.11 trillion pesos.

"Additionally, the global demand for AI (artificial intelligence)-related electronic products is expected to boost merchandise trade, while services trade will benefit from the ongoing recovery in international tourism."

On the other hand, Huang flagged downside risks to the growth outlook.

"Increasing trade tensions, including the possibility of higher tariffs, could undermine merchandise trade performance," she said.

"Current account deficits since the end of the pandemic make the economy susceptible to exchange rate volatility, especially if there are unexpected monetary policy shifts by major developed country central banks."

She also noted how the country is vulnerable to climate shocks and natural disasters, which could lead to "significant economic and social losses."