The World Bank on Tuesday revised its growth forecast for the Philippine economy downward for 2025, projecting a 5.1-percent expansion, slower than its previous estimate of 5.3 percent.
The institution noted in its latest Philippines Economic Update (PEU) the 2025 slowdown was led by domestic shocks, weaker investment and soft global demand.
It expects a modest recovery in 2026 and 2027, supported by resilient consumption and easing inflation. Growth is forecast to improve to 5.3 percent in 2026 and 5.4 percent in 2027.
The 2025 deceleration stems from lower domestic investment, weak business confidence, a significant decline in foreign direct investment and domestic shocks, including typhoon and flood disruptions, and governance concerns that have delayed public investments, it said.
Services exports have also slowed due to weaker growth in business services and fewer tourist arrivals.
The report highlights that sustained growth in the coming years will require stronger execution of public investments, credible fiscal consolidation and structural reforms to enhance competitiveness in the tradables sector—which includes manufacturing, agriculture, information technology, and tourism—and to harness high-potential urban corridors.
“The Philippines can leverage its strong economic foundations to implement bolder reforms that can unlock faster, more inclusive growth,” said Zafer Mustafaoğlu, World Bank division director for the Philippines, Malaysia and Brunei.
“Removing barriers that limit investment and productivity and strengthening competitiveness can create more and better-paying jobs, expand opportunities, and reinforce economic resilience,” said Mustafaoğlu.
Growth is expected to recover over the next two years on strong domestic demand. Private consumption is projected to strengthen as inflation remains low, employment stays robust and monetary easing lowers interest rates, facilitating easier borrowing for businesses and households.
Investment is also expected to strengthen as public infrastructure projects regain momentum and recent investment liberalization reforms in sectors like telecoms, transport, logistics and renewable energy begin to improve the business environment for firms.
Measures to revive the tradables sector, which has been overshadowed by “non-tradables” like construction, domestic services and retail, could strengthen the recovery, the report says.
The PEU suggests that strengthening competition in logistics and energy, simplifying and digitizing permits, streamlining customs and improving investment facilitation would reduce costs, attract private investment, and revive the sector’s dynamism.
The report also says that investing in and effectively managing emerging urban corridors is critical for the country’s advance toward upper-middle-income status. Over 60 percent of urban local government units (LGUs) across Luzon, Visayas and Mindanao are at the core of these corridors.
“For long-term, sustained growth, the Philippines needs to ensure that low-income and middle-income regions continue to grow faster than the National Capital Region as they have done over the past decade,” said Jaffar Al-Rikabi, World Bank senior economist.
“To do that, high-potential urban areas—urban corridors—need to be harnessed as engines of job creation and productivity that generate spillover benefits across the country,” said Al-Rikabi.
The Philippines also needs to strengthen the overall framework for local service delivery and the capacity of LGUs, which manage about one-quarter of public spending. These reforms, the report says, can create a virtuous cycle of investment, productivity, and local revenue growth, accelerating growth and job creation nationwide.
