The World Bank has revised its growth forecast for the Philippine economy, expecting a 5.8 percent expansion this year, driven by softer inflation and strategic government spending.

However, this projection falls below the 6 to 7 percent forecasted by the Philippines’ Development Budget Coordination Committee.

According to the World Bank’s outlook report released on Tuesday, the local economy is anticipated to sustain growth momentum as inflation eases, providing consumers with additional funds for spending on goods, services and investments.

Strong household consumption, continued robustness in the services sector and improved trade, fueled by a global demand rebound for goods and ongoing recovery in services exports like tourism, are cited as key growth drivers.

Inflation stability remains a priority for the Bangko Sentral ng Pilipinas, which aims to keep inflation within the 2 to 4 percent range by adjusting its policy rate for private lenders.

Address food supply concerns

World Bank senior economist Ralph Van Doorn stressed the need for the government to swiftly address food supply concerns, particularly as food prices contributed significantly to recent inflation spikes, with April inflation reaching 3.8 percent.

The government’s response includes ongoing efforts to manage supply and demand dynamics and ensure adequate imports of staple food items.

Additionally, targeted food subsidies for low-income families are crucial to meeting basic needs, especially in the face of extreme weather events like El Niño, which impact agricultural production and essential services.

“To manage inflation, the continued implementation of non-monetary strategies is essential, including efforts to optimize supply and demand management and to secure timely and adequate imports of staple food items,” Doorn said.

Progress in fiscal management

Despite inflation challenges, the World Bank notes progress in fiscal management, with the government reducing the budget deficit in the first quarter to 4.5 percent of gross domestic product while increasing revenue collection to support public services.

Looking ahead, the World Bank forecasts further economic growth of 5.9 percent for both 2025 and 2026.

The Philippine government’s budget committee holds a more optimistic outlook, projecting growth between 6.5 to 7.5 percent for next year and between 6.5 to 8 percent from 2026 to 2028.