World Bank sees weak Philippines growth until 2027

Urges government to double down on reforms

MANILA, Philippines — With Philippine economic growth expected to fall below target this year until 2027, the World Bank is urging the country to double down efforts to pursue reforms aimed at improving the business environment and rebuilding fiscal space to safeguard and achieve faster growth.

Jaffar Al-Rikabi, senior country economist for economic policy at the World Bank, said in a press briefing yesterday that the multilateral lender’s latest Philippine Economic Update report shows a gross domestic product (GDP) growth of 5.3 percent this year, slower than last year’s revised 5.7 percent growth.

He said the the World Bank expects the Philippine economy to grow at a slightly faster pace of 5.4 percent in 2026 and 5.5 percent in 2027.

These growth forecasts are all below the government’s annual growth target of six to eight percent for this year until 2027.

Al-Rikabi said the economy is expected to post below target growth due to global policy uncertainty and external developments, which are affecting the performance of exports, as well as the services and industry sectors.

“All of that helps to explain why growth is not meeting our aspirational targets,” he said.

He said the first quarter economic performance already reflected the high levels of uncertainty and the slowdown in the growth in the services and industry sectors.

First quarter economic growth was at 5.4 percent, slightly faster than the previous quarter’s 5.3 percent expansion, but slower than the 5.9 percent growth in the same period of 2024.

As the Philippines is expected to miss its growth goals due to greater global policy uncertainties and the slowdown in global growth, Al-Rikabi said there is a “need, therefore, to really double down on reforms so that the Philippines can safeguard and accelerate its growth journey.”

Among the World Bank’s recommendations is for the Philippines to support medium term stabilization by rebuilding fiscal space.

This will allow the country to take action when there are unexpected growth shocks.

“To do that, you’re going to need much stronger tax reforms, for example, looking at tax policy and compliance caps to increase the tax-to-GDP ratio,” Al-Rikabi said.

As the uncertainty on the reciprocal tariffs imposed by the US is expected to affect growth performance, World Bank lead economist for the Philippines Gonzalo Varela said the country also has an opportunity to focus on reforms that would reduce the costs of doing business and make it easier to invest in the country.

“It currently takes 106 days for a foreign firm to be registered in the Philippines. There is a lot of space to reduce that,” he said.

According to Varela, the Philippines should advance regional trade agreements, noting that the value of such trade deals have increased amid global uncertainty on trade rules.

“More domestic reforms will help counteract some of these shocks,” Varela said.