The Philippines has made significant progress in reducing trade costs, attracting investments, and supporting micro, small and medium enterprises (MSMEs) over the past seven years, but the government must .accelerate trade facilitation reforms to sustain the gains, according to its latest Trade Policy Review (TPR).
The WTO’s Trade Policy Review Body (TPRB) conducted its sixth review of the Philippines’ trade policies and practices on June 24 and 26, covering the period from 2018 to 2025. The previous review was conducted in 2018.
The review identified key reforms needed to maintain momentum, including improving the onboarding of the National Single Window, establishing non-preferential rules of origin, and reviving the Unified Logistics Pass initiative.
“These actions would further strengthen the trade regime, reduce trade costs, enhance competition, and enable the Philippines to fully realize the benefits of trade,” the TPRB report stated.
The report identified logistics as a major driver of the country’s high trade costs, with logistics expenses estimated to account for 27 percent of retail prices.
Citing ESCAP-World Bank data, the review said Philippine trade costs are about 20 percent higher than the ASEAN average due to inadequate infrastructure and regulatory inefficiencies. As a net importer of food and energy, the country also remains vulnerable to external supply shocks, with import price pass-through significantly influencing domestic inflation.
Remarkable resilience
During the review period, the Philippines expanded investments in connectivity infrastructure, eased foreign equity restrictions, streamlined trade procedures, lifted quantitative restrictions on rice imports, adopted a national competition policy, and reformed government procurement rules.
The report said the economy demonstrated “remarkable resilience,” with real GDP growing by an average of about 5 percent annually. GDP per capita rose to USD4,279 in 2025 from USD3,280 in 2018, bringing the country closer to the World Bank’s upper middle-income threshold.
Growth was driven largely by robust domestic demand, particularly private consumption supported by rising incomes in export-oriented industries and public investments in infrastructure to reduce logistics costs.
The government plans to sustain infrastructure spending at 5-6 percent of GDP annually through 2028 under the “Build Better More” program.
Services and exports
Services remained the economy’s largest sector, accounting for 63 percent of GDP and 45 percent of total exports of goods and services in 2025. Services exports increased 34 percent between 2018 and 2024 to $51.6 billion, led by the information technology and business process management (IT-BPM) industry.
While artificial intelligence (AI) poses potential risks to some jobs, the report said it has so far complemented rather than displaced workers in the IT-BPM sector. Although about 36 percent of BPM jobs are considered highly vulnerable to AI automation, available evidence suggests AI has boosted productivity instead. Market research cited in the report showed BPO revenues rising by as much as 150 percent due to AI adoption.
Merchandise exports, meanwhile, grew a more modest 8 percent during the review period. About 48 percent of Philippine merchandise exports are linked to global value chains, supported by the country’s participation in the Information Technology Agreement (ITA).
The Philippines accounts for around 10 percent of global semiconductor assembly, testing and packaging output. ITA-covered products represented more than 60 percent of goods exports in 2024, led by integrated circuits, semiconductor sensors and memory media. Strong global demand, partly driven by AI investments, helped merchandise exports reach $83.8 billion in 2025, up 15.2 percent year on year.
Investment and MSMEs
The report also highlighted reforms to liberalize the investment regime, including amendments to the Public Service Act that removed foreign equity restrictions in most infrastructure sectors except seaports and basic telecommunications. It also cited business climate reforms such as the establishment of Green Lanes to expedite strategic investments.
MSMEs, which account for about 99 percent of Philippine businesses, continued to receive government support. The domestic supplier preference margin was increased to 25 percent from 15 percent.
Other support measures include the Tatak Pinoy (Proudly Filipino) Strategy covering nine priority sectors, the new PPP Code, and an export guarantee program, under which micro enterprises accounted for 89.1 percent of the 71,288 borrowers assisted between December 2020 and December 2025.
The review also noted the country’s tariff and duty measures to protect domestic industries, the consolidation of trade-related state guarantees under the Philippine Guarantee Corp., and developments in the tax regime and trade agreements.
As of end-2025, the Philippines was a signatory to 12 regional trade agreements, including five new agreements and two updated pacts concluded during the review period.
