ASIATODAY.ID, MANILA — The Philippine economy is losing steam in 2025, slowed by collapsing investment, domestic shocks, and weakening global demand.
The stark warning comes from the World Bank’s latest Philippines Economic Update (PEU), which stresses that without decisive reforms and stronger public investment execution, the country risks missing its long-promised growth trajectory in Southeast Asia.
Despite the slowdown, the report expects a modest rebound in 2026–2027, driven by resilient household consumption and easing inflation.
The World Bank underscores that the Philippines must accelerate public investment, pursue credible fiscal consolidation, and address long-standing structural barriers that hinder productivity in manufacturing, agriculture, IT-BPM, and tourism.
“The Philippines has strong economic foundations, but it needs bold reforms to unlock faster and more inclusive growth,” said Zafer Mustafaoğlu, World Bank Division Director for the Philippines, Malaysia, and Brunei on December 9, 2025.
He highlighted that removing investment bottlenecks and improving competitiveness are essential to creating better-paying jobs and strengthening economic resilience.
Growth Falls to 5.1% in 2025
The Bank projects that GDP growth will drop to 5.1% in 2025—lower than earlier forecasts—before inching up to 5.3% in 2026 and 5.4% in 2027.
The downturn is largely driven by: weak domestic investment, deteriorating business confidence, a steep decline in foreign direct investment, typhoon- and flood-related disruptions, governance challenges delaying public spending, slowing services exports amid weaker global demand and fewer tourist arrivals.
Signs of Recovery Starting 2026
While 2025 is expected to be challenging, the medium-term outlook shows gradual improvement. Private consumption is set to strengthen as inflation stays low, employment remains solid, and monetary easing reduces borrowing costs.
Investment is expected to regain momentum as major infrastructure projects resume and recent liberalization measures in telecoms, logistics, transport, and renewable energy begin to enhance the business environment.
Reviving the Tradables Sector Is Crucial
The PEU warns that the Philippine economy has become overly reliant on “non-tradables” such as retail, domestic services, and construction. Complicated regulations have stifled manufacturing growth, reduced the number of exporting firms, and kept exports trailing behind regional peers.
Key reforms needed include: increasing competition in logistics and energy, digitizing and simplifying business permits, streamlining customs processes, improving investment facilitation.
These measures could reduce costs, draw more private capital, and restore dynamism in the tradables sector—critical for long-term growth.
Urban Corridors: The New Engines of Growth
The report also highlights the importance of developing urban corridors across Luzon, Visayas, and Mindanao. More than 60% of urban LGUs are located along these high-potential zones, where productive firms and formal wage jobs are concentrated.
“For long-term, sustained growth, lower- and middle-income regions must continue to outpace the National Capital Region,” said Jaffar Al-Rikabi, World Bank Senior Economist.
He emphasized that urban corridors must be fully leveraged as hubs of job creation and productivity to generate economy-wide spillovers.
Strengthening Local Governments is Key
The World Bank adds that the Philippines must improve its framework for local service delivery and boost the capacity of LGUs, which manage roughly one-quarter of total public spending. Strengthened local governance can create a positive cycle of investment, productivity, and local revenue growth—accelerating nationwide job creation. (AT Network)
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