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Robust household consumption is seen to prop up the economy this year, Fitch Solutions’ unit BMI said, but warned that inflationary pressures and other risks could dampen this outlook.

“We hold a positive outlook for consumer spending in the Philippines in 2025. For 2025, we expect it to be driven mostly by strong economic growth and its feed-through into higher disposable income, as well as a stable labor market,” BMI said in a report.

BMI expects Philippine gross domestic product (GDP) to grow by 6.3% this year and 6.7% in 2026. These projections are within the government’s 6-8% target for both years.

The Philippine economy grew by 5.6% in 2024, missing the government’s 6-6.5% target. 

“A deteriorating external demand will likely be a drag on the Philippines’ GDP. However, the private final consumption expenditure will be positive,” BMI said.

Household spending is seen to accelerate to 5.3% this year, it said. Private consumption, which accounts for about three-fourths of the economy, grew by a lackluster 4.8% in 2024.

Consumer confidence has also shown “upward momentum,” amid the continued recovery from the pandemic, BMI said.

In the central bank’s latest consumer expectations survey, an improvement was seen in consumer confidence for the first quarter of this year and the next 12 months. This, amid a more upbeat outlook on higher income, additional sources of income and more available jobs.

“Easing inflationary pressures will provide relief to real household incomes and enable growth in spending,” BMI said.

“A tight labor market will support spending, as real wage growth returns to positive territory, which will support purchasing power over the year,” it added.

On the other hand, BMI noted that risks continue to weigh on private consumption, such as prolonged high inflation and weaker remittances.

“These risk factors will adversely affect household purchasing power, while geopolitical tensions have also emerged as a risk that is likely to impact inflation and interest rates.”

“Although inflationary pressures have largely eased in many markets, price levels remain high, and many households have not yet experienced real wage growth sufficient to restore purchasing power to their pre-2022-2024 inflationary shock levels.”

BMI expects inflation to average 3.3% this year, in line with the Bangko Sentral ng Pilipinas’ (BSP) own forecast. Headline inflation remained steady at 2.9% in January.

“If nominal income growth does not keep pace with inflation, the purchasing power of consumers will deteriorate, which would be a drag to their spending.”

“Prolonged inflation, particularly in relation to food, will mean that consumers will have to increasingly allocate more of their disposable income towards meeting necessities,” it added.

Meanwhile, the peso is seen to “depreciate slightly” this year and settle at PHP 58 against the dollar.

“Despite the roughly 1.7% depreciation of the peso, this is still a relatively positive outcome compared with the depreciation of 11% seen in 2022 and the 2% seen in 2023.”

“The weaker rate in 2025 is due to the combination of a higher expected consumer price index in the Philippines as well as the US Fed’s hawkish tilt,” it added.

In 2024, the peso weakened by 4.28% to close at PHP 57.845 versus the dollar from its end-2023 finish of PHP 55.37. The local currency sank to the record-low PHP 59-per-dollar level thrice last year.

“While persistent intervention by the BSP in the forex market will help to curb depreciatory pressures on the peso, earlier rate cuts by the BSP relative to the Fed will continue to weigh on the currency.”

“Nevertheless, the relatively stable rate will mean that the Philippines, which remains heavily reliant on imports to meet local demand, will see relative stability in import inflation,” BMI added.

Elevated household debt also poses a risk to consumer confidence, BMI said.

“It not only constrains future borrowing capacity but impacts current disposable income levels. This is particularly true as debt servicing costs rise in response to increases in interest rates.”

“In many markets, central banks rapidly hiked interest rates during the 2022-2023 high inflationary period, reaching levels to which most households have not been accustomed over the past decade,” it said.

From mid-2022 to late 2023, the BSP was the most aggressive central bank in the region as it hiked key rates by 450 basis points (bps) to tame inflation.

The BSP began its easing cycle in August last year, lowering borrowing costs by a total of 75 bps by end-2024. 

“While interest rates will not reach the previous historical lows of the last decade, easing monetary policy will alleviate some debt servicing cost pressures,” BMI said. — Luisa Maria Jacinta C. Jocson

Budget Secretary Amenah F. Pangandaman on Wednesday said the government’s 6-8% gross domestic product (GDP) growth target this year may be adjusted after underwhelming 2024 growth and global uncertainties.

“Let’s wait for it. Maybe, we need to adjust. So, if needed, we’ll do the necessary adjustment,” Ms. Pangandaman, who chairs the Development Budget Coordination Committee (DBCC), told reporters on Wednesday.

The DBCC will conduct its first meeting this year in March.

“All the numbers are already in. We already saw our GDP, inflation, but our employment is still very good. We’ll wait for the others… There’s a policy meeting soon. So, once all the numbers are in, and then we’ll check what’s happening with our peers,” Ms. Pangandaman said.

The Philippine economy grew by a weaker-than-expected 5.6% in 2024, falling short of the government’s revised 6-6.5% target.

Asked if the country could hit 8% growth this year, Finance Secretary Ralph G. Recto earlier told BusinessWorld that “6-6.5% [growth] is doable for 2025.”

Department of Budget and Management (DBM) Principal Economist and Undersecretary Joselito R. Basilio said the DBCC will likely retain the 6% lower band for 2025.

“Most likely retain. The lower part is firmer, meaning it won’t be lowered or raised anymore. Given the reasons for achieving the growth target, such as election spending, and agriculture is okay,” Mr. Basilio told reporters.

Mr. Pangandaman said they will also wait for the Bangko Sentral ng Pilipinas’ (BSP) next policy move.

“The BSP has its own thing. They also crunch their own numbers based on the international outlook… Let’s wait for it. Maybe we need to adjust,” she said.

BSP Governor Eli M. Remolona, Jr. over the weekend said they may cut interest rates by 50 basis points (bps) this year. He said the cuts could be delivered in increments of 25 bps each in the first and second half of the year.

The central bank began its easing cycle in August last year, slashing borrowing costs by a total of 75 bps to 5.75% by end-2024.

Meanwhile, Mr. Basilio said the DBCC could revise the revenue and expenditure program for this year to be “more realistic.”

“Depending on the condition in March. It will be there’s Trump on the outside. Then, our budget is still rolling to 2025. Then, depending on what the finalized revenue measures are,” Mr. Basilio said.

The DBCC expects revenues to hit PHP 4.64 trillion in 2025, while expenditure program was set at PHP 6.182 trillion.

It also kept the deficit ceiling at -5.3% of GDP for 2025.

USAID freeze

At the same time, Ms. Pangandaman said she does not see any downside risks yet associated with recent policies announced by US President Donald J. Trump.

“Nothing yet. As of now, it’s just the pronouncements and most of it is just the policy review of the existing orders and previous policy. So, we wait, we wait, we wait until we get their final agenda in this administration,” she said.

The Trump administration on Tuesday announced that it was going to put on leave all directly hired employees of the US Agency for International Development (USAID) globally and recall thousands of personnel working overseas, Reuters reported. 

USAID programs around the world, including the Philippines, were halted after Mr. Trump ordered a freeze on most US foreign aid to ensure this is aligned with his “America First” policy.

“I think, again, what Trump’s administration said is that they will just review, give them a 30-day review of all the aid that they provide to development countries, otherwise. So, ngayon, hintay muna po tayo,” Ms. Pangandaman said in mixed Filipino and English.

Ms. Pangandaman said the government is hopeful that after the review, the US will still provide funding for projects in the Philippines.

Asked if the government can step in and provide the funding instead, she said: “We don’t know yet. The aid that is being given to us by not just the US but also our other development partners is a bit big. So, let’s see if we can.”

National Economic Development Authority Secretary Arsenio M. Balisacan said he sees no significant impact from the suspension of foreign aid. — Aubrey Rose A. Inosante

The national Government’s (NG) outstanding debt hit P16.05 trillion at the end of 2024 amid higher debt issuances and a stronger dollar, the Bureau of the Treasury (BTr) reported on Tuesday.

Data from the Treasury showed outstanding debt rose by 9.8% or PHP 1.44 trillion from PHP 14.62 trillion at the end of 2023.

Month on month, the debt slipped by 0.2% from the record high PHP 16.09 trillion as of end-November.

“The year-end debt level closely aligned with the  2025 Budget of Expenditures and Sources of Financing projections of PHP 16.06 trillion, reflecting a minimal variance of only 0.03%,” the BTr said.

Outstanding debt as a share of gross domestic product (GDP) inched up to 60.7% as of end-2024 from 60.1% a year earlier, the Treasury said.

This was still slightly above the 60% threshold considered by multilateral lenders to be manageable for developing economies.

It was also a tad higher than the government’s 60.6% debt-to-GDP ratio target for 2024, mainly due to the “lower-than-expected full-year real GDP growth outcome of 5.6%,” the BTr said.

“Nevertheless, the minimal deviation from the programmed debt underscores NG’s effective cash and debt management strategies, including its proactive management of the level and timing of its external debt issuances amidst the volatile exchange rate environment,” it added.

The Treasury attributed the year-on-year increase in the debt stock to the “PHP 1.31-trillion net issuance of debt instruments in line with the government’s deficit program, as well as the PHP 208.73-billion valuation effect of US dollar strengthening.”

The Philippine peso in 2024 closed at PHP 57.845 versus the dollar, weakening by PHP 2.475 or 4.28% from its end-2023 finish of PHP 55.37.

Data from the BTr showed the bulk or 68.1% of total debt stock came from domestic debt, while 31.9% came from external sources.

Domestic debt rose by 9.1% to PHP 10.93 trillion as of end-December from PHP 10.02 trillion at the end of 2023. This was composed mostly of government securities.

“The net issuance of domestic securities contributed PHP 905.31 billion to the annual increase, while local currency depreciation increased the peso valuation of outstanding foreign currency-denominated domestic securities by PHP 7.18 billion,” the Treasury said.

Month on month, domestic borrowings inched up by 0.1% from PHP 10.92 trillion in November.

Meanwhile, foreign borrowings jumped by 11.4% to PHP 5.12 trillion as of end-2024 from PHP 4.6 trillion at the end of 2023.

“The year-on-year increase was mainly due to PHP 401.74 billion in net external debt availments, while the peso depreciation against the US dollar increased external debt valuation by PHP 201.55 billion,” the BTr said.

“Third-currency adjustments provided an PHP 80.74 billion downward valuation offset.”

External debt consisted of PHP 2.68 trillion in global bonds and PHP 2.44 trillion in loans.

Last year, the government raised USD 4.5 billion from the international market. It issued US dollar-denominated global bonds, raising USD 2 billion in May and USD 2.5 billion in August.

Month on month, external debt slipped by 0.9% from PHP 5.17 trillion in November “as local- and third-currency fluctuations reduced the peso valuation of foreign currency-denominated debt by PHP 66.6 billion and PHP 30.68 billion, respectively, while net availments added PHP 48.87 billion.”

As of end-December, the NG’s overall guaranteed obligations slipped by 0.8% to PHP 346.66 billion from PHP 349.44 billion in the previous year.

Month on month, guaranteed debt slumped by 17.9% from PHP 422.04 billion at end-November.

“The month-on-month decline/improvement in the NG outstanding debt is consistent with the stronger peso exchange rate versus the US dollar in December 2024 by 0.775 or 1.3% month on month to close at PHP 57.485 (vs. PHP 58.62 in November 2024),” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“The stronger peso effectively reduced the peso equivalent of the outstanding NG foreign debt when converted to pesos,” he added.

Mr. Ricafort said outstanding debt “could go up to new record highs” after the NG’s USD 3.3-billion global bond issuance last month.

The Philippines raised USD 3.3 billion from the issuance of dollar and euro-denominated sustainability bonds in January.

The NG’s debt stock is expected to hit PHP 17.35 trillion by end-2025.

The National Government plans to borrow PHP 2.55 trillion this year — PHP 2.04 trillion from the domestic market and PHP 507.41 billion from external sources.

The government is aiming to bring down the debt-to-GDP ratio to 60.4% this year, 60.2% in 2026 and 56.3% in 2028. — A.R.A. Inosante

The Philippine economy may face pressure amid President Donald J. Trump’s policies, which could impact the currency, inflation and remittances, Fitch Ratings said.

“Shifting economic and foreign policies in the US pose risks for the Philippines, as well as for other sovereigns,” Krisjanis Krustins, director at Fitch Ratings’ Asia-Pacific Sovereigns team and primary sovereign rating analyst for the Philippines, said in a report.

Mr. Trump began making good on his threat to impose higher import tariffs on major trading partners. A 10% tariff on all Chinese imports to the US took effect on Tuesday, but steep tariffs on imports from China and Mexico were postponed.

“Further strengthening of the US dollar from trade protectionism could put further pressure on the Philippine peso and inflation, although weaker global growth and diversion of Chinese exports could offset this to some extent,” Mr. Krustins said.

The peso has been under pressure in the past months amid the dollar surge. It fell to a record-low PHP 59 level thrice last year.

The central bank expects inflation to average 3.3% this year and 3.5% in 2026 but warned the balance of risks to the inflation outlook remains tilted to the upside.

“The Philippines would be vulnerable to a change in US immigration policy, given the importance of remittances for domestic consumption, although these are fairly diversified,” Mr. Krustins said.

The United States typically accounts for about 40% of cash remittances to the Philippines.

Apart from tariffs, Mr. Trump also sought to impose harsher immigration measures.

Mr. Trump, a Republican, has taken an array of executive actions to deter illegal immigration, and ramping up arrests and deportations of illegal migrants, Reuters reported.

 ‘Strong growth’

Meanwhile, Fitch expects the country to post “strong medium-term gross domestic product (GDP) growth and gradual fiscal consolidation.”

The credit rater sees the economy growing by 5.9% this year, slightly below the government’s 6-8% target. It expects GDP to expand by 6.2% in 2026.

Growth next year will be driven by further monetary easing, infrastructure spending and trade and investment reforms, it said.

Latest data from local statistics agency showed Philippine GDP grew by a slower-than-expected 5.2% in the fourth quarter. This brought full-year growth to 5.6%, short of the 6-6.5% government goal.

“As noted in June, positive rating action would hinge on even faster growth and debt reduction, or structural improvements, such as stronger governance and GDP per head,” Mr. Krustins said.

“Nevertheless, domestic and external uncertainties have risen, with risks skewed towards slower consolidation,” he added.

The National Government’s budget deficit widened by 5.92% to PHP 1.18 trillion in the first 11 months of 2024, the Treasury reported. The government has set a deficit ceiling at 5.7% of GDP for 2024 and targets to bring this to 3.7% by 2028.

“A focus on growth, as well as the approach of midterm elections in May 2025 will limit the scope for faster debt reduction,” Mr. Krustins said.

“The government already pared its consolidation plans in 2024, and the Finance secretary has ruled out new taxes possibly until the end of the Marcos administration in 2028.”

Fitch also cited domestic political tensions, which could “weigh on economic and fiscal performance.”

“Fierce public disagreements have erupted between President Ferdinand R. Marcos, Jr. and Vice-President Sara Duterte-Carpio and their families,” it added. – Luisa Maria Jacinta C. Jocson, Reporter

Electricity prices at the Wholesale Electricity Spot Market (WESM) declined in January due to a higher average system margin, according to the Independent Electricity Market Operator of the Philippines (IEMOP).

Preliminary data from IEMOP showed that the WESM price system-wide dropped by 14.3% to PHP 2.96 per kilowatt-hour (kWh) in January, from PHP 3.45 per kWh in December 2024.

Supply decreased by 0.2% to 20,110 megawatts (MW). Demand, on the other hand, fell by 5.6% to 12,529 MW. This resulted in a 10.26% increase in the average system margin to 7,581 MW.

“Due to the increase in the average system margin, the system average price decreased by 14.3%, dropping to PHP 2.96 per kWh,” said Arjon B. Valencia, manager for corporate planning and communications at IEMOP.

In Luzon, the spot price decreased by 8.5% month-on-month, falling to PHP 2.98 per kWh from PHP 3.26 per kWh.

Available supply dropped by 1.6% to 13,962 MW. Demand also decreased by 6.4% to 8,741 MW.

WESM prices in the Visayas declined by 19.1% to PHP 3.13 per kWh from PHP 3.87 per kWh the previous month.

The grid’s supply dropped by 4.5% to 2,372 MW. Demand fell by 4.4% to 1,856 MW.

For Mindanao, IEMOP said that WESM prices decreased by 31.9% month-on-month to PHP 2.65 per kWh from PHP 3.88 per kWh.

Supply increased by 8.7% to 3,775 MW, while demand declined by 2.9% to 1,931 MW.

IEMOP operates the WESM, where energy companies can buy power when their long-term contracted supply is insufficient to meet customer needs. — Sheldeen Joy Talavera

Philippine manufacturing activity continued to expand in January, albeit at the slowest pace in five months, S&P Global said on Monday.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) stood at 52.3 in January, easing from the 54.3 logged in December 2024. This was the lowest PMI reading in five months or since the 51.2 reading in August 2024.

In its report, S&P Global said the PMI reading signaled a “solid improvement” in manufacturing conditions in the Philippines.

A PMI reading above 50 denotes better operating conditions than in the preceding month, while a reading below 50 shows a deterioration.

“The Filipino manufacturing sector started the year with a further and strong improvement in demand. Output grew again, albeit at a pace which notably weakened from December,” Maryam Baluch, economist at S&P Global Market Intelligence, said in a statement on Monday.

In January, the Philippines had the fastest PMI reading among six Association of Southeast Asian Nations (ASEAN) member countries ahead of Indonesia at 52.3.

A contraction in manufacturing activity was seen in Thailand (49.6), Vietnam (48.9),  Malaysia (48.7), and Myanmar (47.4).

Demand for Philippine-made goods improved in January, although the pace of growth slightly decelerated from the recent high observed in December, S&P Global said.

“Nevertheless, the rate of expansion in intakes of new orders remained historically robust, as firms reported that strong client demand and the acquisition of new customers drove increased sales,” it said.

S&P noted that solid demand trends drove manufacturing output higher, but January marked the second weakest in the current 10 consecutive months of growth.

This was attributed to competition and elevated raw material prices that constrained production.

However, an increase in production requirements prompted manufacturers to hike purchasing activity in January.

“Companies also focused on stock building, with both pre- and post-production inventories rising at historically strong rates during the latest survey period,” S&P said.

“Notably, stocks of finished goods recorded a fresh increase following a sharp decline in December.”

In January, supply chains remained under pressure. The lack of delivery trucks and port congestion prolonged the average lead times for inputs, S&P said.

The decline in vendor performance in January was the least pronounced in five months.

S&P Global said employment remained flat for the second consecutive month.

The increased sales enticed manufacturing companies to hire more workforce but was offset by reports of resignations, it said.

“Regarding prices, both cost burdens and output charges increased at similar, but historically subdued, rates,” S&P said, adding that high material and transportation costs drove up expenses which firms pass on to their clients.

For the coming year, manufacturers maintained a positive outlook, driven by expectations of stronger market demand and the upcoming election period. However, overall sentiment remained below the trend level.

“If demand trends continue to improve as they have done, then employment growth could be on the cards in the months ahead,” Ms. Baluch said.

Ms. Baluch said the election year will likely help drive growth in the manufacturing sector, citing the survey respondents.

“We could see 2025 shaping up to be another strong year of growth for the Philippines manufacturing sector with industrial production growth forecasted at 3.9% in 2025, up from 2.4% in 2024,” she said.

“In fact, the anticipation of greater demand has already prompted goods producers to increase their inventory levels.”

The Philippines will hold its midterm elections on May 12.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the slower pace in factory activity was partly due to “the seasonal decrease in demand and production activities upon crossing the new year after the Christmas holiday season.”

“Still relatively higher prices, interest rates, and weaker peso exchange rate vs. the US dollar since 2022 also partly weighed on demand and manufacturing activities,” Mr. Ricafort added.

He also said that increased government spending on infrastructure and some election-related spending could benefit some manufacturers that are part of the supply chains for various infrastructure projects.

In an e-mail, Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said the Philippines remains as the region’s main outperformer but “hit a big speed bump.”

“Overall, the regionwide index for January was the softest print in 11 months; at best, its general slowdown is still stabilizing.”

ASEAN PMI stood at 50.4 in January, easing from 50.7 in December.

Mr. Chanco said headline reading will likely fall rather than improve, “as short-term leading indicators continue to weaken.” — Aubrey Rose A. Inosante

The Department of Agriculture (DA) declared on Monday a food security emergency on rice, the latest effort by the government to lower the cost of the staple grain.

“This emergency declaration allows us to release rice buffer stocks held by the National Food Authority to stabilize prices and ensure that rice, a staple food for millions of Filipinos, remains accessible to consumers,” Agriculture Secretary Francisco P. Tiu-Laurel, Jr. said in a statement.

The DA cited the “extraordinary” increase in local rice prices despite the drop in global prices and the reduction in tariffs last July.

Last month, the National Price Coordinating Council approved the resolution urging the DA to declare a food security emergency for rice.

Under Republic Act No. 12708 or the Agricultural Tariffication Act, the Agriculture secretary can declare a food security emergency in case of rice supply shortages or extraordinary price spikes.

Under a food security emergency, the NFA would release its rice buffer stock to government agencies, local government units, and the KADIWA ng Pangulo program.

“The NFA currently holds a buffer stock of approximately 300,000 metric tons (MT) of rice, half of which could be released over the next six months to ensure sufficient supply for emergencies and disaster response,” the DA said.

“The NFA may increase this volume, if necessary, as it prepares to begin palay procurement in the coming weeks,” it added.

The department said the food security emergency “will remain in effect until the situation improves,” adding it will regularly review the situation.

Last week, the NFA said that it would release about 150,000 MT of rice stocks over a six-month period or 30,000 MT per month, allowing the NFA warehouses to free up space during the incoming harvest season.

President Ferdinand R. Marcos, Jr. last year issued Executive Order No. 62 which slashed tariffs on rice imports to 15% from 35% previously until 2028. This was aimed at lowering rice prices and tame inflation.

According to the DA’s price monitoring of Metro Manila markets as of Feb. 1, a kilo of imported special rice was priced between PHP 52 and PHP 61, compared with the PHP 57 and PHP 65 per kilo a year ago.

The price of imported premium rice stood at PHP51 – PHP 58 per kilo as of Feb. 1. from PHP 54 – PHP62 per kilo last year.

On the other hand, imported well-milled rice is currently between P40 and P52 per kilo, while imported regular milled rice is at PHP 38 to PHP 48 per kilo. — A.H.Halili

The Philippines may have difficulty achieving the upper end of the government’s 6-8% gross domestic product (GDP) growth target amid heightened global uncertainties this year.

Asked if the country could hit 8% growth this year, Finance Secretary Ralph G. Recto told BusinessWorld: “6-6.5% [growth] is doable for 2025.”

Mr. Recto, however, said the outlook will depend on “inflation, interest rates, and strength of US dollar.”

The Philippine economy expanded by 5.6% last year, slightly faster than 5.5% in 2023 but fell short of the government’s revised 6-6.5% target.

The National Economic and Development Authority earlier said the GDP growth was hampered by extreme weather events, geopolitical tensions, and subdued global demand — which is now considered as the “new normal.”

Multilateral lenders World Bank and the Asian Development Bank project the Philippines to grow by 6.1% and 6.2% in 2025.

In an e-mail interview with BusinessWorld, Ateneo School of Government Dean Philip Arnold “Randy” P. Tuaño said the Philippines will “face difficulty” meeting the 8% growth target.   

“It was relatively easy to achieve a 7% to 8% growth in the 2022-2023 period as we have been coming from a low-income base during the pandemic,” Mr. Tuaño said.   

“Even then, 5% to 6%, while a respectable rate of growth, would make it difficult to achieve significant growth in income among the middle class and vulnerable in the next few years,” he added. 

HSBC economist for ASEAN Aris D. Dacanay said that achieving an 8% growth rate is possible, but “a tall order.”

He cited global and domestic headwinds, including a sluggish Chinese economy, tariff risks, and climate-related impacts on the agricultural sector.

“This isn’t to say the Philippines won’t grow. Growing by 6.3%, we expect it to be one of Asia’s top performers in 2025 with the business process outsourcing sector (BPO), digitalization, and household consumption — sectors of the economy that are not subject to tariff risks — leading the charge,” he told BusinessWorld via e-mail.

In a note, Citi downgraded its 2025 GDP forecast to 5.9%, from 6% previously, after the weaker-than-expected growth momentum in 2024.

“Still, recent activity data such as income remittances  continue to suggest that domestic demand would remain well-supported. Commercial bank loans rose 11.1% year on year in November 2024 suggesting robust business activities and consumption growth… Furthermore, continued monetary easing and more moderate inflation are also expected to support domestic demand expansion in 2025,” Citi said.

More investment needed

Mr. Recto said the upper end of the government’s target “can only be achieved if private investments double or triple.”

Department of Budget and Management (DBM) Principal Economist Joselito “Jojit” R. Basilio said the economy is likely to post 6-7% growth this year, although the upper end of the target “remains doable under certain circumstances.”

“Aside from the government’s continued ramping up of spending on public construction, recently approved PPPs (public-private partnership) projects should complement the aggressive ‘Build Better More’ program,” he said.

“But there are conditions that can push the economy to do more and grow by 7% to 8% in 2025,” he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said hitting the upper end of the 2025 goal is a “long shot, realistically.”

“This would require more foreign and local investments, more tourists especially foreign, more merchandise exports that all generate more jobs and other economic opportunities that lead to higher per capita income,” he said.

To drive faster growth this year, Mr. Tuaño said the government should accelerate infrastructure projects and push regulatory reforms to boost investments, especially outside of the main urban centers.

The government should also invest in human resource development via education, healthcare, technological upgrading, and boost small businesses to drive growth, he said.

“Some potential opportunities for growth include stronger consumption driven by remittance growth and continuous expansion of services, and also the rebound of tourism,” Mr. Tuaño said.

Citi said continued policy easing by the Bangko Sentral ng Pilipinas will support GDP growth this year. It maintained its expectation for a 25-basis-point (bp) rate cut this month.

“We expect the BSP to cut again in June and August, skipping April, partly to ascertain a few outcomes, including the potential increase of US tariffs and possible impact on global trade and US dollar-Philippine peso, the Fed’s rate cut decisions, the Philippines’ midterm election campaigning’s potential positive impact on domestic demand (although investment may see some delays from the 45-day pre-election ban on project disbursement) etc,” Citi said.

The Monetary Board has cut benchmark borrowing costs by a total of 75 bps since it began its easing cycle in August 2024, bringing its key rate to 5.75%.

Mr. Basilio said private consumption is expected to recover strongly, increasing by 6% in 2025 due to stabilized inflation and lower interest rates.

“The domestic demand is also anticipated to shift from ‘being subdued’ to one of gaining its momentum,” he said.

Mr. Basilio also noted that agricultural output is anticipated to make “a strong rebound” this year.

However, Mr. Dacanay said relying on fiscal and monetary policy to boost growth will be difficult.

“The government is in the midst of consolidating its fiscal resources from the pandemic, while the Federal Reserve puts a floor under how much the Bangko Sentral ng Pilipinas can cut policy rates to boost growth,” Mr. Dacanay said.

Risks to the outlook

Analysts cited geopolitical tensions and uncertainty as one of the downside risks to the Philippines’ economic outlook.

“Downside risks include geopolitical risks and uncertainties in global trade markets, considering further that goods export sector performance has been relatively anemic,” DBM’s Mr. Basilio said.

Mr. Tuaño said other downside risks include slower export growth due to “tariff escalation in the developed world… and natural disasters taking a toll on productive labor and capital.”

On the other hand, key upside risks include improved labor market conditions and election spending.

“For the current year, election spending is expected to result in increased economic activities, including advertising and campaign-related expenses in transport, hospitality, retail trade and others,” DBM’s Mr. Basilio said. — Aubrey Rose A. Inosante, Reporter with inputs from Aaron Michael C. Sy