THE Philippine economy is poised to remain one of Asia’s fastest-growing this year despite weaker exports, easing inflation, and looming risks from global trade tensions.
Speaking at the Mandaue Business Month Summit 2025 on Wednesday, Aug. 27, 2025, Marco Miguel Javier, BPI vice president for Economics and Market Research, said the government has revised its 2025 growth outlook downward as merchandise exports are expected to contract by two percent amid softer global demand.
Still, domestic consumption, which makes up about 75 percent of gross domestic product (GDP), is projected to anchor growth and cushion the impact of external headwinds.
“Consumption has always been our shield. In the middle of a trade war, we’re protected because we don’t export much. The risk comes when global shocks affect domestic demand, like during the Covid-19 pandemic,” Javier noted.
Inflationary pressures are seen to ease further, with rice prices stabilizing and oil markets relatively calm. This gives the Bangko Sentral ng Pilipinas room to cut policy rates by 25 basis points this week, with another possible reduction later in the year. Lower borrowing costs are expected to support consumer and business loans, which have already been expanding at double-digit rates.
Credit card loans surged 30 percent year on year as of May, while auto loans grew 18 percent and overall bank lending rose 12 percent. Non-performing loans have also improved, easing to 3.3 percent from a pandemic peak of 4.5 percent, reflecting stronger borrower capacity to pay.
The peso, however, may remain under pressure as the country continues to run both a budget and current account deficit. Javier projected the local currency could weaken toward P59 against the U.S. dollar by 2026, especially if global risks escalate.
He cited U.S. president Donald Trump’s renewed push for tariffs, which could stoke inflation and force trading partners — including the Philippines, which currently has a $5-billion surplus with the U.S. — to absorb higher costs. Geopolitical tensions in Ukraine, the Middle East, and the Red Sea also continue to disrupt global shipping and trade routes, raising costs for import-dependent economies.
Cebu heartbeat of the Visayas
On the sectoral front, Javier pointed to Central Visayas as the fastest-growing region for the past two years, led by services and agriculture. The region’s momentum, he said, underscores the growing role of areas outside Metro Manila in driving national growth.
Cebu Vice Governor Glenn Anthony Soco, addressing business leaders at the same summit, noted that the Philippines remains the second fastest-growing economy in Southeast Asia, expanding 5.4 percent in the first quarter of 2025. Cebu alone posted a P411-billion economy in 2023, up six percent, and nearly P1 trillion when combined with highly urbanized cities—making it the third largest in the country after Metro Manila and Laguna.
“Cebu is truly the heartbeat of the Visayas and a major driver of national growth,” Soco said, crediting micro, small, and medium enterprises (MSMEs), workers, and communities as the backbone of its economy.
Looking ahead, Soco outlined a growth vision anchored on four priorities: expanding countryside development through integrated townships; strengthening connectivity with major infrastructure projects such as the Metro Cebu Expressway, coastal road, fourth bridge, and a universal metro rail transit system; advancing transformative urban projects like the Cordova Reclamation near key transport hubs; and deepening regional integration through initiatives such as a proposed third bridge linking Cebu and Bohol.
“These are not just infrastructure projects but investments in the future that will create jobs, attract investors, and sustain growth,” Soco said.
Challenges
Moreover, Javier said real estate activity is showing signs of recovery as demand for condominiums picks up outside the National Capital Region. However, private construction remains 12 percent below pre-pandemic levels. In tourism, foreign arrivals reached only 2.5 million in the first half, well below Thailand’s 14 million.
Javier also flagged structural challenges that could shape the next growth cycle. The business process outsourcing sector faces disruption from artificial intelligence, requiring a shift into higher-value services such as medical and legal support. Meanwhile, the expected boom in data centers will require an additional 1,400 megawatts (MW) of reliable power supply over the next five years, far exceeding the country’s current 200-MW capacity.
“Consumption will continue to carry us, but sustaining growth will depend on how we address competitiveness gaps, infrastructure needs and our ability to move up the value chain,” Javier said. / KOC