Despite the escalating global uncertainties, particularly the heightened tensions in the Middle East and the imposition of new US tariffs, Philippine economic managers remain optimistic about the country’s economic resilience.
This optimism underpins the recent recalibration of the country’s economic growth targets from this year through the end of President Ferdinand Marcos Jr.’s term in 2028.
The Development Budget Coordination Committee (DBCC), the inter-agency body responsible for setting macroeconomic targets, projects the economy, as measured by gross domestic product (GDP), to expand by 5.5 to 6.5 percent this year. This is a downward revision from its earlier December forecast of 6 to 8 percent.
The Philippine economy closed 2024 with a 5.7 percent expansion, and demonstrated a 5.4 percent growth in the first quarter of 2025, fueled by accelerated government and household spending
The DBCC anticipates GDP growth to expand between 6 to 7 percent from 2026 to 2028, from the previous 6 to 8 percent projection.
The DBCC said the revisions took into account heightened global uncertainties, such as the unforeseen escalation of tensions in the Middle East and the imposition of US tariffs.
Despite these external pressures, the DBCC affirmed its readiness to implement “timely and targeted measures to mitigate their potential impact on the Philippine economy.” It also highlighted the country’s “ample international reserves,” providing a robust buffer against external shocks.
Even with these adjustments, the Philippines remains a standout performer in ASEAN, driven primarily by robust domestic demand.
The Asian Development Bank (ADB) also downgraded its economic growth forecast for the Philippines to 5.6 percent from a previous estimate of 6 percent
The Manila-based lender also reduced the 2026 growth forecast for the Philippines to 5.8 percent from 6.1 percent, citing external headwinds.
The World Bank, meanwhile, expects the Philippine economy to grow by 5.3 percent in 2025, a slight decrease of 0.3 percentage points from the 2023-2024 average.
On inflation, the DBCC has narrowed its projection for 2025 to 2 to 3 percent, down from the earlier 2 to 4 percent, citing a “whole-of-government approach” aimed at maintaining a low inflation environment. Inflation is expected to stabilize within the 2 to 4 percent target range from 2026 to 2028.
Oil prices are also expected to remain relatively stable. Despite geopolitical tensions, Dubai crude oil prices are projected to average between $60 to $70 per barrel from 2025 to 2028, tempered by easing global demand and anticipated increases in global oil inventories.
The foreign exchange rate is also assumed to remain stable, averaging P56 to P58 per US dollar from 2025 through 2028, supported by lower domestic inflation and global financial conditions.
Trade assumptions have also been refined. Goods exports are now projected to contract by 2 percent in 2025, primarily due to slower global demand and heightened trade policy uncertainties, before recovering to a modest 2 percent growth from 2026 to 2028.
Conversely, goods imports are expected to rise by 3.5 percent in 2025 driven by resilient domestic economic activity, further increasing to 4 percent in subsequent years supported by stable domestic consumption and sustained infrastructure spending.
Fiscal consolidation remains a cornerstone of the government’s medium-term strategy. The national government is committed to progressively reducing the fiscal deficit from 5.5 percent of GDP in 2025 to 4.3 percent by 2028.
This will be achieved while simultaneously ramping up investments in critical areas such as infrastructure, human capital, and social services.
The DBCC emphasized that this “well-calibrated approach reflects our strong resolve to uphold fiscal discipline without compromising our goals of inclusive and sustainable development, even amid a more challenging global landscape.”
Revenue collections are anticipated to steadily increase, reaching 16.3 percent of GDP by 2028. This growth is underpinned by recently enacted revenue reforms, including VAT on non-resident digital service providers and initiatives promoting capital markets efficiency, alongside ongoing improvements in tax administration, compliance enforcement, and digitalization.
National Government disbursements are set to remain a significant growth driver, averaging 21.1 percent of GDP annually over the medium term. Infrastructure spending will be sustained at 5 to 6 percent of GDP each year, ensuring continuous improvements in physical connectivity. Public investments will also prioritize education, healthcare, agriculture, digital transformation, and social protection, aligning with the objectives of the Philippine Development Plan (PDP) 2023–2028.
In line with these projections, the proposed Fiscal Year 2026 National Budget is set at P6.793 trillion, equivalent to 22 percent of GDP. This represents a 7.4 percent increase from the FY 2025 budget of P6.326 trillion, reflecting the government’s steadfast commitment to fostering inclusive economic growth while maintaining fiscal sustainability.
