The World Bank (WB) expects Philippine economic growth to remain below the government’s targets for the next two years.

In a report on Tuesday, Oct. 7, the WB retained its Philippine projections of 5.3-percent growth for 2025 and 5.4 percent for 2026.

These forecasts are lower the government’s downgraded growth targets of 5.5- to 6.5-percent gross domestic product (GDP) expansion for this year and six to seven percent for next year.

“The Philippines will benefit from robust domestic demand, supported by easing inflation, lower interest rates, and strong labor markets. Growth will also be sustained by public infrastructure investment exceeding five percent of GDP and private investment spurred by the reforms,” the WB said.

According to the WB, the Philippines is less affected by the United States’ (US) reciprocal tariff due to the country’s export specialization in electronics and semiconductors.

The WB also observed that the Philippines has liberalized key sectors such as logistics, telecommunications, and renewable energy (RE), while also working to enhance workforce skills through the newly enacted enterprise-based education and training (EBET) framework, which is expected to boost efficiency and sustain economic growth.

The WB added that in the Philippines—as in Indonesia and Vietnam—a doubling of a firm’s productivity leads to a three- to eight-percent increase in employment, compared to a 13-percent increase among developed countries belonging to the Organization for Economic Cooperation and Development (OECD).

The WB noted that in five Southeast Asian economies—namely the Philippines, Indonesia, Malaysia, Thailand, and Vietnam—robot adoption has contributed to higher employment and increased labor earnings.

The WB also added that for aging economies such as Japan and South Korea, welcoming international workers from younger nations—particularly the Philippines—could help offset the adverse growth impacts of aging populations and address the growing demand for elderly care workers.

It also emphasized that manufacturing exports have helped drive growth in the Philippines, as well as in Indonesia and Thailand—likely due to increased shipments ahead of the anticipated US tariff hike.

The WB highlighted that industrial production has expanded year-on-year across several East Asian economies, with the Philippines, Malaysia, and Vietnam benefiting from stronger semiconductor output and exports driven by rising demand from data centers and artificial intelligence (AI)-related industries.

“Public investment in China, Indonesia, and the Philippines helped partly offset private-sector weakness,” the WB added.

The WB also noted that the Philippines recorded a 26.1-percent increase in exports, driven by higher gold shipments.

“East Asia’s export-oriented labor-intensive growth lifted a billion people out of poverty in the last three decades, but the region now faces the twin challenges of trade protection and job automation,” said WB East Asia and Pacific (EAP) chief economist Aaditya Mattoo.

“Nominal interest rates in EAP are trending down, though they remain relatively high in Indonesia and the Philippines compared to other Association of Southeast Asian Nations (ASEAN)-5 countries and China,” the report added.

The WB said that the Philippines, along with Vietnam, is pursuing fiscal consolidation by increasing revenues through taxes and mandatory dividend payments from state-owned enterprises.

“The Philippines is also consolidating by reducing expenditures over the medium-term,” it added.

In the Philippines, the WB emphasized that reforms are needed to improve tenure security, connect farmers to markets, and standardize products.

"The region faces a jobs paradox—relatively strong economic growth alongside insufficient creation of quality jobs," said Carlos Felipe Jaramillo, WB vice president for EAP. "Bolder reforms to remove impediments to firm entry and competition would unlock private capital and allow dynamic and productive firms to flourish and create new job opportunities. The WB remains a steadfast partner to the region’s commitment to inclusive growth that matches the ambition of its people.”

(Ricardo M. Austria)