SINGAPORE, September 25, 2025 – The Philippine economy continues to grow at a steady pace, though slower than the pre-COVID trend. Strong domestic consumption and a stable labor market are driving growth, while inflation has eased below the central bank’s target range. Meanwhile, global trade tensions have had a limited impact, thanks to the economy’s domestically oriented structure and diversified export markets.
The near-term macroeconomic and financial outlook remains stable, underpinned by solid domestic demand and healthy financial indicators—including strong profitability, low non-performing loan (NPL) ratios, and ample liquidity and capital buffers. However, sustaining momentum and lifting medium-term growth will require refinement to the country’s growth strategy, including more effective investment by both the public and private sectors to prepare for climate shocks and the upskilling of the labor force for the age of artificial intelligence (AI).
This preliminary assessment was made by the ASEAN+3 Macroeconomic Research Office (AMRO) during its Annual Consultation Visit to the Philippines from September 2 to 19, 2025. The mission was led by Principal Economist Jinho Choi, with policy discussions involving AMRO Director Yasuto Watanabe and Chief Economist Dong He. Discussions focused on the Philippines’ recent macroeconomic developments, outlook, risks and vulnerabilities, and policy priorities for sustaining growth and maintaining financial stability.
Economic developments and outlook
“Despite external headwinds, the Philippine economy is expected to continue growing at 5.6 percent in 2025 and 5.5 percent in 2026,” said Dr. Choi. “Growth will be driven mainly by robust private consumption, while private investment and exports will face challenges from US tariff policies. If sustained, the tariff impact—partly offset by front-loaded export orders this year—could weigh more heavily in 2026.”
Inflation is expected to remain low and stable, returning to the Bangko Sentral ng Pilipinas’s (BSP’s) target range. Consumer Price Index (CPI) inflation is projected to rise from 1.8 percent in 2025 to 3.2 percent in 2026. Softer supply-side pressures—such as easing food and global commodity prices—alongside measures such as tariff cuts on rice and the streamlining of non-tariff barriers, are helping to contain inflation even as robust demand continues.
The current account is expected to remain in deficit, while the financial account is expected to register sustained net inflows, supported by stable economic outlook. Monetary policy has entered an easing cycle, while the banking sector performance remains solid. Fiscal consolidation is ongoing, albeit at a slower pace than planned to keep growth-enhancing measures at the forefront of the agenda, and to remain adaptive to domestic and external developments.
Risks and vulnerabilities
While near-term growth remains steady, the outlook is clouded by external uncertainties. Downside risks include aggressive US protectionist policies, slower growth in key trading partners, tighter global financial conditions, and the possibility of renewed inflationary pressures.
Structural challenges—such as lingering pandemic scarring, insufficient infrastructure development, and limited manufacturing capacity—continue to constrain potential growth.
Policy recommendations
Fiscal and monetary policies are broadly aligned to sustain macroeconomic stability and growth. Fiscal policy should continue balancing fiscal consolidation with development priorities, particularly infrastructure and human capital investment. Monetary policy, after aggressive rate hikes to curb high inflation, has become more accommodative. The BSP should proceed cautiously with further rate adjustments, given the near-zero output gap and potential supply shocks.
In the medium-to-long term, accelerating fiscal consolidation while upgrading infrastructure and strengthening the financial stability framework will be key. Enhancing monetary policy transmission—by deepening liquidity, broadening the long-term bond investor base, and improving interest rate pass-through in the bank credit channel—would also strengthen policy effectiveness.
To bolster resilience against climate and disaster shocks, raise competitiveness, and enhance long-term growth potential, the Philippines should refine its growth strategy with streamlined targets and a well-established performance evaluation framework for public spending. To embrace the rapid advancement of AI, the authorities should prioritize upgrading sectors with comparative advantages, improving the business environment, continuing upskilling and re-skilling of labor, and encouraging private investment.
The AMRO mission team expressed its sincere appreciation to the Philippine authorities and stakeholders for their cooperation, insightful discussions, and warm hospitality.
About AMRO
The ASEAN+3 Macroeconomic Research Office (AMRO) is an international organization established to contribute toward securing macroeconomic and financial resilience and stability of the ASEAN+3 region, comprising 10 members of the Association of Southeast Asian Nations (ASEAN) and China; Hong Kong, China; Japan; and Korea. AMRO’s mandate is to conduct macroeconomic surveillance, support regional financial arrangements, and provide technical assistance to the members. In addition, AMRO also serves as a regional knowledge hub and provides support to ASEAN+3 financial cooperation.
AMRO Director Yasuto Watanabe, Chief Economist Dong He, and the mission team met with Bangko Sentral ng Pilipinas Governor Eli M. Remolona Jr. and other senior officials.