The Philippine economy continues its steady expansion, fueled by strong domestic consumption and a stable labor market, according to the preliminary assessment from the ASEAN+3 Macroeconomic Research Office (AMRO). The near-term outlook remains stable, but a strategic shift in investment and labor force preparation is crucial to sustain momentum and boost medium-term growth.
AMRO, which concluded its Annual Consultation Visit to the Philippines on September 19, 2025, projects the economy to grow at 5.6 percent in 2025 and 5.5 percent in 2026.
“Despite external headwinds, growth will be driven mainly by robust private consumption,” said AMRO Principal Economist Dr. Jinho Choi, who led the mission. “Inflation has eased below the central bank’s target and is expected to remain low and stable, aided by softer supply-side pressures and government measures like tariff cuts on rice.”
The assessment highlights the economy’s resilience, noting that its domestically-oriented structure and diversified export markets have limited the impact of global trade tensions. Financial indicators also remain healthy, underpinned by strong profitability, low non-performing loan (NPL) ratios, and ample liquidity and capital buffers within the banking sector.
Inflation: Consumer Price Index (CPI) inflation is projected to rise from 1.8 percent in 2025 to 3.2 percent in 2026, returning to the Bangko Sentral ng Pilipinas’ (BSP’s) target range.
Policy Stance: Monetary policy has entered an easing cycle after aggressive hikes, while fiscal consolidation is ongoing, though at a measured pace to keep growth-enhancing investments a priority.
While the near-term outlook is steady, AMRO emphasizes that sustaining and elevating growth requires the Philippines to refine its strategy, particularly in preparing for future challenges.
- Building Climate Resilience and Competitiveness:
The Philippines needs a refined growth strategy with clearer targets and evaluation frameworks for public spending to bolster resilience against climate and disaster shocks and enhance competitiveness. This requires more effective public and private sector investment in preparedness.
- Preparing the Workforce for AI:
To embrace the rapid advancement of Artificial Intelligence (AI), AMRO recommends the authorities prioritize upgrading sectors with comparative advantages and improving the business environment. Crucially, this includes continued upskilling and re-skilling of the labor force to adapt to the age of AI.
- Maintaining Financial Stability and Policy Effectiveness:
AMRO also recommends strengthening the financial stability framework and accelerating fiscal consolidation in the medium-to-long term. To enhance policy effectiveness, it suggests deepening liquidity, broadening the long-term bond investor base, and improving interest rate pass-through in the bank credit channel to strengthen monetary policy transmission.
The AMRO mission team held discussions on the Philippines’ recent macroeconomic developments, outlook, risks, and policy priorities for sustaining growth and financial stability. The policy discussions involved AMRO Director Yasuto Watanabe and Chief Economist Dong He.
