The World Bank has revised downward its growth forecast for the Philippines, projecting the economy to expand by 5.1 percent in 2025, lower than its 5.3 percent estimate issued in June this year, as domestic and global headwinds weigh on performance.

In its latest Philippines Economic Update on 9 December, the World Bank said the downgrade reflects weaker investment activity, soft foreign direct investment inflows, and declining business confidence, compounded by domestic shocks such as typhoon- and flood-related disruptions and governance issues that delayed public infrastructure projects.

The report noted that services exports also lost momentum in 2025, driven by slower growth in business services and fewer tourist arrivals, further dampening overall economic activity.

Growth to gradually recover in 2026, 2027

Despite the slower pace this year, the World Bank expects growth to gradually recover, forecasting expansion of 5.3 percent in 2026 and 5.4 percent in 2027, supported by resilient private consumption and easing inflation.

Stable employment conditions and monetary easing are also expected to help stimulate spending and improve access to credit for households and firms.

Zafer Mustafaoğlu, World Bank Division Director for the Philippines, Malaysia and Brunei, said the country’s economic fundamentals remain solid but stressed the need for stronger execution of reforms to lift long-term growth.

The World Bank emphasized that sustaining growth will require improved public investment execution, credible fiscal consolidation, and structural reforms aimed at strengthening competitiveness, particularly in the tradables sector such as manufacturing, agriculture, information technology and tourism.

Revitalizing manufacturing, exports

The update also highlighted the importance of revitalizing manufacturing and export activity, noting that recent growth has leaned heavily toward non-tradable sectors, including construction and domestic services.

Regulatory barriers have limited job creation in manufacturing and reduced the number of exporting firms, leaving Philippine exports trailing regional competitors.

Looking ahead, the World Bank said better competition in logistics and energy, streamlined permit processes, digitized government services, and improved customs and investment facilitation could help reverse the slowdown and support a broader-based recovery.