THE Philippine economy is set to expand at 5.6 percent in 2025 and 5.5 percent in 2026, driven by strong household spending and a resilient labor market, according to the Asean+3 Macroeconomic Research Office (Amro).
The forecast, however, remains below the country’s pre-pandemic growth trajectory, reflecting lingering structural constraints and external risks.
“Despite external headwinds, the Philippine economy is expected to continue growing,” said Amro principal economist Jinho Choi following the group’s annual consultation visit to Manila earlier this month. He noted that private investment and exports are facing pressure from US tariff measures, which could weigh more heavily on growth in 2026 after a temporary boost from front-loaded orders this year.
Inflation is expected to stay within the Bangko Sentral ng Pilipinas’ (BSP) two to four percent target band, rising from 1.8 percent in 2025 to 3.2 percent in 2026 as demand remains robust. Softer food and commodity prices, along with tariff cuts on rice and streamlined import rules, are helping to contain price pressures.
The current account deficit is projected to persist, though it will be offset by sustained financial inflows amid a stable outlook. Monetary policy has shifted into an easing cycle following aggressive rate hikes, while the banking system remains sound with low non-performing loan ratios and ample capital buffers.
Fiscal consolidation continues, though at a slower pace than planned to prioritize growth-supportive spending.
Downside risks
Amro flagged several downside risks, including escalating US protectionism, weaker growth in key trading partners, tighter global financial conditions and the possibility of renewed inflation shocks. At home, the Philippines continues to face pandemic scarring, inadequate infrastructure and limited manufacturing depth, which constrain its potential output.
The group urged policymakers to refine the country’s growth strategy to sustain momentum.
Recommendations include strengthening infrastructure and human capital investment while carefully balancing fiscal consolidation; enhancing monetary transmission by deepening liquidity and broadening the long-term investor base; and improving interest rate pass-through in the banking system.
To bolster resilience against climate shocks and keep pace with rapid technological change, Amro advised the Philippines to streamline spending targets, strengthen performance evaluation of public investment and prioritize workforce upskilling and re-skilling for the age of artificial intelligence.
“Refining the country’s growth strategy is critical not only to sustain current momentum but also to lift medium-term potential,” Choi said. / KOC