The Philippine economy is expected to expand by six percent in 2025, fueled by lower inflation and anticipated interest rate cuts, analysts say.
In a PhilStar Global report, Ritchie Ryan Teo, chief investment officer at Sun Life Investment Management and Trust Corp., forecasts that gross domestic product (GDP) growth will rise to 6.2 percent in 2026, up from 5.6 percent in 2024. He attributes this to a rebound in consumer spending as inflation continues to ease.
The economy grew by 5.2 percent in the last quarter of 2024, bringing full-year GDP growth to 5.6 percent, which was below the government’s six to 6.5 percent target. However, Teo expects inflation to remain low at 3.1 percent in 2025, well within the Bangko Sentral ng Pilipinas’ (BSP) two to four percent target range.
With inflation under control, Teo anticipates that the BSP will cut interest rates two to three times this year, mirroring expected moves by the US Federal Reserve. Standard Chartered Bank economist Jonathan Koh also forecasts a six percent GDP growth for 2025, hitting the lower end of the government’s six to eight percent target.
Despite the positive outlook, Koh warns of potential risks to household consumption due to labor market vulnerabilities. While the unemployment rate remains low at below four percent, a significant portion of the workforce consists of self-employed and unpaid family workers, rather than salaried employees in private companies.
On a positive note, stable remittances and improving loan growth are expected to drive economic activity. Koh predicts three BSP rate cuts of 25 basis points each, likely in June, August, and the fourth quarter, which could bring the key policy rate down to five percent from 5.75 percent.
However, he cautions that the BSP remains cautious about external risks, particularly a weaker peso, which could affect inflation expectations. Teo added that the central bank’s decisions would likely be influenced by the Federal Reserve, as cutting rates ahead of the Fed could further weaken the peso.
