By Luisa Maria Jacinta C. Jocson, A reporter
Gross Domes OF THE PHILIPPINES GDP is expected to grow faster this year and in 2026 amid strong domestic demand, the United Nations (UN) said.
In its latest World Economic Situation and Prospects report, the UN said it expects the Philippine economy to grow by 6.1% in 2025 and 6.2% in 2026.
“The Philippines is one of the most developed economies in East Asia,” UN Department of Economic and Social Affairsficer Zhenqian Huang said in a follow-up email.
“The expected continued growth reflects strong domestic demand, continued public investment, and the positive effects of recent investment policy changes, as well as a healthy labor market and a growing service sector.”
The UN forecasts are both within the government’s target of 6-8% growth this year and next.
It noted that GDP growth is likely to reach 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 activity and robust private consumption,” said Ms. Huang.
“Cutting cash amid inflation will support domestic demand in the near term,” he added.
The Bangko Sentral ng Pilipinas (BSP) began its easing cycle in August, lowering interest rates by a total of 75 basis points (bps) last year. This lowered the target repurchase rate to 5.75%.
BSP Governor Eli M. Remolona, Jr. he has revealed other pieces this year, saying “there is still room for freedom.”
Annual inflation reached 3.2% in 2024, according to the BSP’s own forecast.
It also marked the first time that annual inflation fell within the central bank’s target of 2-4% from 2021, when inflation averaged 3.9%.
Ms. Huang also noted “strong” remittance flows, which will help boost domestic spending.
The latest data from the central bank showed that remittances grew by 3% year-on-year to $28.3 billion in the January-October period.
“Despite ongoing fiscal consolidation, improved government fundraising over the past decade has enabled continued public spending on critical infrastructure to create long-term opportunities,” he said.
The latest data from the Bureau of the Treasury (BTr) showed the budget deficit of the National Government (NG) stood at P1.18 trillion in the 11-month period. Revenue jumped 15.16% year-on-year to P4.11 trillion.
“In addition, global demand for electronic products related to AI (artificial intelligence) is expected to increase trade in goods, while trade in services will benefit from continued recovery in international tourism.”
On the other hand, Ms. Huang flagged downside risks to the growth outlook.
“An increase in trade tensions, including the possibility of higher tariffs, could affect the performance of commodity trade,” he said.
United States President-elect Donald J. Trump, who will take office next week, has pledged to impose a 10% global tariff and a 60% tariff on Chinese goods.
“The current account deficit since the end of the pandemic makes the economy vulnerable to exchange rate volatility, especially if there is an unexpected change in monetary policy by major advanced banks.”
He also noted that the country is vulnerable to climate shocks and natural disasters, which could lead to “great economic and social losses.”
A recent study by the Asian Development Bank (ADB) showed that the Philippines could lose 18.1% of its GDP by 2070 due to climate change under the condition of high air pollution.
Meanwhile, the UN expects core inflation to remain steady at 3% this year until 2026.
“Inflation in the Philippines has not been positive and is expected to remain within the central bank’s target rate in the near term,” Ms. Huang said.
This year, the BSP expects inflation to be 3.3%. Its risk-adjusted forecast is 3.4%.
Inflation will be driven mainly by reducing food price pressure, he said.
“While inflation is not a major policy concern at present, inflationary pressures are unlikely to fully dissipate… Potentially higher tariffs from trading partners, disruptions to supply chains and trade routes, and climate-related disasters may exert upward pressure on prices,” Ms. Huang said.
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