The Philippines is poised to remain the fastest-growing economy in Southeast Asia in 2025, buoyed by low inflation and the possibility of further interest rate cuts. However, economists warn that global uncertainties, weak private investment, and trade challenges could restrain the country’s economic momentum.
HSBC economist Aris Dacanay projected the Philippine economy to grow by 5.4 percent next year—still the highest in the region—though slightly slower than the 5.7 percent growth seen in 2024. Vietnam is expected to follow at 5.2 percent, trailed by Indonesia (4.5%), Malaysia (4.2%), and both Singapore and Thailand (1.7%).
Dacanay noted that while the country maintains its regional edge, elevated tariffs and lackluster demand from major partners, especially the U.S., are taking a toll. He stressed that “uncertainty alone can prevent foreign direct investments,” which are essential, as about 10 percent of the Philippines’ capital formation comes from FDI.
“Many Philippine firms are delaying capacity expansion,” he added, citing poor demand from global markets. However, the country’s limited exposure to the U.S.—only around 3 percent of GDP—is seen as a buffer.
Inflation, currently at 1.3 percent, is expected to average 1.8 percent this year. This gives the Bangko Sentral ng Pilipinas (BSP) space to potentially lower rates to 5 percent. A rate cut as early as October remains possible, depending on the U.S. Federal Reserve’s actions.
HSBC sees the peso stabilizing at around 55 per dollar in the second half of 2025, potentially supporting more capital inflows.
Meanwhile, ANZ Research offered a more cautious outlook, forecasting 2025 growth at a slower 5.1 percent. It flagged productivity issues, sluggish wage increases, and a dip in electronics exports and manufacturing as growth hurdles. Despite easing inflation, ANZ said real incomes remain constrained, pushing more households to depend on credit card debt.
The research firm expects the BSP to lower its policy rate by 50 basis points this year, down to 4.75 percent. But with fiscal policy still tight, the full impact of monetary easing might be blunted.
Both HSBC and ANZ emphasized that the BSP will remain data-driven, particularly as oil price shocks and geopolitical tensions continue to pose risks.
“The peso’s reaction to recent oil shocks shows how vulnerable we remain to global supply disruptions,” Dacanay said. “But the BSP still has space to deepen its easing cycle, as long as inflation remains benign.”
