By means of Luisa Maria Jacinta C. Jocson, Reporter
The gross domestic product of the Philippines Product (GDP) growth is expected to accelerate this year and into 2026 due to strong domestic demand, the United Nations (UN) said.
In its latest World Economic Situation and Prospects report, the UN says it expects the Philippine economy to grow 6.1% in 2025 and 6.2% in 2026.
“The Philippines is one of the strongest growers among East Asian economies,” says the UN Department of Economic and Social Affairs Economic Affairs.Ficer Zhenqian Huang said in a follow-up email.
“The expected continued growth reflects robust domestic demand, continued public investment and the positive effects of recent investment policy reforms, together with a vibrant labor market and a growing services sector.”
The UN forecasts fall within the government’s growth target of 6 to 8% for this year and next.
It was noted that GDP growth was likely to average 5.6% in 2024, below the government’s target of 6-6.5%.
By 2025, the Philippines is expected to be the second fastest growing economy in the region, just behind 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 activities and robust private consumption,” Ms. Huang said.
“Monetary easing in a context of lower inflation will support domestic demand in the short term,” she added.
The Bangko Sentral ng Pilipinas (BSP) started its easing cycle in August and cut 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 announced further cuts this year, arguing there is “still room for easing.”
Full-year inflation stood at 3.2% in 2024, in line with the BSP’s own forecast.
It was also the first time annual inflation fell within the central bank’s target of 2-4% since 2021, when inflation averaged 3.9%.
Ms Huang also noted that there are “robust” remittance flows, which will help boost household spending.
The latest data from the central bank shows that remittances grew 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 allowed sustainable government spending on key infrastructure to unlock long-term potential,” she said.
The latest data from the Bureau of the Treasury (BTr) shows that the National Government (NG) budget deficit stood at £1.18 trillion in the eleven-month period. Revenues rose 15.16% year-on-year to P4.11 trillion.
“In addition, global demand for AI (artificial intelligence)-related electronic products is expected to boost trade in goods, while trade in services will benefit from the continued recovery in international tourism.”
On the other hand, Ms. Huang flagged downside risks to growth prospects.
“Increasing trade tensions, including the possibility of higher tariffs, could undermine the trade performance of goods,” she said.
Newly elected US President Donald J. Trump, who will take power next week, has promised to impose a 10% universal tariff and a 60% tariff on Chinese goods.
“The current account deficits since the end of the pandemic make the economy susceptible to exchange rate volatility, especially if there are unexpected monetary policy changes by the major central banks of developed countries.”
She also noted the country’s vulnerability to climate shocks and natural disasters, which could lead to “significant economic and social losses.”
A recent study by the Asian Development Bank (ADB) shows that in a high-emissions scenario, the Philippines could potentially lose 18.1% of its GDP due to climate change by 2070.
Meanwhile, the UN expects headline inflation to remain stable at 3% this year until 2026.
“Inflation in the Philippines has been relatively benign and is expected to remain within the central bank’s targets in the near term,” Ms. Huang said.
This year, the BSP expects inflation to average 3.3%. The risk-adjusted forecast is 3.4%.
The downward trend in inflation will mainly be driven by easing price pressure on food, she said.
“While inflation is not a major policy issue at this time, inflationary pressures are unlikely to disappear completely… Potential higher tariffs from trading partners, disruptions to supply chains and trade routes, and climate-related disasters could reignite upward pressure on prices,” Ms. said Huang.