Manila: The Philippine economy continues to grow at a steady pace, but policy shifts are necessary to address structural headwinds, the ASEAN+3 Macroeconomic Research Office (AMRO) reported.
According to Philippines News Agency, Philippine economic growth is primarily driven by strong domestic consumption and a stable labor market. Inflation has eased, and global trade tensions have had a limited impact due to the economy's domestically oriented structure and diversified export markets. The latest assessment was made during AMRO's Annual Consultation Visit to the Philippines from September 2 to 19, led by Principal Economist Jinho Choi, and involved policy discussions with AMRO Director Yasuto Watanabe and Chief Economist Dong He.
Choi indicated that the Philippine economy is expected to grow by 5.6 percent this year and 5.5 percent in 2026 despite external headwinds. Growth is anticipated to be driven mainly by robust private consumption, although private investment and exports will face challenges from US tariff policies. Choi warned that the tariff impact, partly offset by front-loaded export orders this year, could weigh more heavily in 2026.
AMRO expects inflation to remain low and stable, settling at 1.8 percent this year and 3.2 percent in 2026, supported by softer supply-side pressures, tariff cuts on rice, and the streamlining of non-tariff barriers. According to AMRO, the near-term macroeconomic and financial outlook remains stable, underpinned by solid domestic demand and healthy financial indicators, including strong profitability, low non-performing loan (NPL) ratios, and ample liquidity and capital buffers.
However, AMRO noted that sustaining momentum and lifting medium-term growth would require refining the country's growth strategy. This includes more effective investment by both the public and private sectors to prepare for climate shocks and upskilling the labor force for the age of artificial intelligence (AI). AMRO emphasized that fiscal policy should continue balancing fiscal consolidation with development priorities, particularly infrastructure and human capital investment. Monetary policy has become more accommodative after aggressive rate hikes to curb high inflation, and AMRO advised the Bangko Sentral ng Pilipinas (BSP) to proceed cautiously with further rate adjustments, given the near-zero output gap and potential supply shocks.
In the medium-to-long term, AMRO highlighted the need to accelerate fiscal consolidation while upgrading infrastructure and strengthening the financial stability framework. To improve resilience against climate and disaster shocks, raise competitiveness, and enhance long-term growth potential, AMRO urged the Philippines to refine its growth strategy with streamlined targets and a well-established performance evaluation framework for public spending.
AMRO also recommended embracing the rapid advancement of AI by prioritizing the upgrading of sectors with comparative advantages, improving the business environment, continuing upskilling and re-skilling of labor, and encouraging private investment.
