Harnessing inherent strengths: The Philippine economic outlook for 2025

The future does not change overnight. As the new year begins, it brings an opportunity to either start anew or build upon existing progress and the gains achieved thus far.

For the Philippines, several notable developments at the close of 2024 have set the stage for a promising 2025.

For one, President Ferdinand “Bongbong” Marcos Jr. signed into law the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act, which aims to modernize the country's tax incentive framework, making it more globally competitive, investment-friendly, predictable, and accountable.

Moreover, the free trade agreement between the Philippines and South Korea, which came into effect in December 2024, is poised to strengthen bilateral relations and boost economic collaboration moving forward.

What sets 2025 apart is its significance as an election year, with voters selecting members of Congress and local governments. This is a pivotal moment for the nation’s democratic processes, underscoring the importance of aligning candidates' priorities with the actual needs of the people on the ground.

A November 2024 Pulse Asia survey found that most Filipino adults approve of the administration’s efforts in protecting overseas workers (60%) and aiding calamity-hit areas (57%).

However, 82% expressed dissatisfaction with the government’s handling of rising basic commodity prices, despite 74% identifying this as a top concern. This reflects a disconnect between government actions and Filipinos' urgent priority of controlling inflation.

Indeed, the latest performance ratings emphasize the need for a more proactive approach in addressing these urgent issues. Concrete solutions are necessary to resolve these persistent challenges, particularly since economic concerns have consistently been the top priority for Filipinos.

The latest Consumer Expectations Survey of the Bangko Sentral ng Pilipinas (BSP) also showed that consumer sentiment improved in the fourth quarter of 2024.

The overall confidence index rose to -11.1% from the previous quarter’s -15.6%, driven by expectations of higher income, additional income sources, more working family members, and increased job availability.

Consumer confidence for the first quarter of 2025 and the next 12 months also improved, fueled by optimism about higher income, additional income sources, and more job opportunities.

According to the latest data of the Philippine Statistics Authority (PSA), the gross domestic product grew by 5.2% year-on-year in the third quarter of 2024.

Industry and services expanded by 5.0% and 6.3%, respectively, while agriculture, forestry, and fishing contracted by 2.8%. On the demand side, household consumption rose by 5.1%, alongside growth in government spending (5.0%), gross capital formation (13.1%), and imports (6.4%). However, exports declined by 1.0% year-on-year.

In December 2024, the Development Budget Coordination Committee (DBCC) revised the 2024 growth target to 6.0-6.5%, expecting a boost in the last quarter of 2024 from holiday spending, disaster recovery efforts, low inflation, and a strong labor market.

Growth projections for 2025-2028 were adjusted to 6.0-8.0%, supported by structural reforms. To achieve these goals, the DBCC will prioritize infrastructure development, ease of doing business, and national competitiveness.

The Philippine economy is poised for significant progress in 2025, propelled by a combination of its business-friendly policy reforms and its inherent strengths. By leveraging these advantages, the country has the potential to secure a stronger position on the global stage, particularly in the Indo-Pacific region, where economic opportunities continue to expand. 

Specifically, the Philippines’ geostrategic location, abundant natural resources, and a young population and workforce make it an attractive destination for foreign investors.

These factors create a wide array of opportunities to drive job creation, enhance income security, and improve the quality of life for Filipinos in both the short and long term. To fully capitalize on these strengths, it is essential to establish a conducive environment that for investors to thrive.

The latest data on the Purchasing Managers’ Index (PMI) of ASEAN countries puts the Philippines in the lead with a PMI of 54.3 in December 2024. The PMI serves as an indicator of the current economic trends in the manufacturing and service sectors.

On the part of the Philippine government, ensuring good governance, responsive leadership, and a stable policy environment will be vital in maintaining investor confidence and sustaining long-term economic growth.

Addressing urgent concerns such as controlling inflation, increasing workers’ pay, and reducing poverty must remain top priorities. The government must also strengthen its capacity to cushion the economy from external shocks and global uncertainties that could affect vulnerable segments of the country’s population.

In the international arena, the Philippines should deepen its collaboration with trusted, long-standing partners such as the United States and Japan. These partnerships are vital not only to attracting investments but also to strengthening economic ties that benefit all parties involved.

By strategically engaging with like-minded nations, the Philippines can improve its economic resilience and competitiveness on a global scale. Recently, a trade deal was forged in December 2024 between the Philippines and South Korea that reduces tariffs on certain South Korean products entering the Philippines.

This move is expected to result in lower prices of Korean-made items needed to sustain production of various Philippine products and stabilize the prices of consumer goods. 

Aligning its economic strategies with the needs of its citizens while effectively utilizing international partnerships will enable the Philippines to build a more inclusive future.

By capitalizing on its inherent strengths, implementing well-structured policy reforms, ensuring good governance, and maintaining policy stability, the country can lay a strong foundation for sustained growth, making 2025 a year of optimism and progress.

With the 2025 elections fast approaching, it is crucial that Filipinos vote wisely, selecting leaders who are committed to addressing pressing issues and advancing the country's long-term development goals, building upon the progress that has already been made. 

History repeats itself only when the conditions that caused the misfortunes of the past are tolerated. But when a fundamental change is carried out by the people themselves, the future turns around. That is the bright opportunity that the year 2025 brings to the people of the Philippines. 

Venice Isabelle Rañosa is the research director of the Stratbase Group.