The Philippines is expected to maintain strong economic growth amid global geopolitical tensions, according to the latest Philippines Economic Update (PEU) from the World Bank. The report projects an average growth rate of 6.0 percent for the period 2024-2026, which is anticipated to aid in reducing poverty.
The outlook depends on controlling inflation, adopting supportive monetary policies for business expansion, and maintaining government infrastructure spending while navigating global policy uncertainties.
"Strong growth puts the country on a firmer footing to maintain gains in poverty reduction," said Zafer Mustafaoğlu, World Bank Country Director for the Philippines, Malaysia, and Brunei Darussalam. He noted that proactive measures are necessary due to vulnerabilities from extreme weather events.
The growth forecast for 2024 has been adjusted downward to 5.9 percent from an earlier estimate of 6.0 percent following weaker-than-expected performance in Q3 2024. This downturn was attributed to typhoons affecting millions and disrupting sectors like tourism and construction. However, growth is projected at 6.1 percent in 2025 and returning to 6.0 percent in 2026.
Jaffar Al-Rikabi, World Bank Senior Economist, emphasized the importance of digital transformation for sustainable long-term growth: "Advancing the digital economy...can expand the country’s growth potential." Al-Rikabi also highlighted investing in human capital as essential for harnessing a 'demographic dividend.'
Private consumption is expected to drive medium-term growth due to stable inflation, remittances from overseas workers, and rising employment rates boosting incomes. Improved credit availability and reduced interest rates will support this trend.
The services sector will benefit from increased local spending and tourism recovery alongside continued strength in business process outsourcing (BPO). However, risks such as geopolitical tensions and China's economic weaknesses could impact trade-dependent sectors.
Domestically, managing inflation remains crucial as higher costs could limit private consumption if not addressed effectively. Weather-related disruptions also pose threats to agriculture and other industries.