AMRO sees steady growth for Phl economy amid external headwinds

CEBU, Philippines —  The Philippine economy is set to expand at a steady pace in the next two years, underpinned by strong private consumption and a stable labor market, according to the ASEAN+3 Macroeconomic Research Office (AMRO).

But the research firm said, sustaining momentum will require deeper reforms and greater investment in infrastructure, climate resilience and workforce upskilling to prepare for the age of artificial intelligence.

In its preliminary assessment following an annual consultation mission to Manila this month, AMRO projected GDP growth of 5.6 per cent in 2025 and 5.5 per cent in 2026. The outlook reflects robust household demand, even as private investment and exports face headwinds from US tariff policies.

“Despite external headwinds, the Philippine economy is expected to continue growing,” said Jinho Choi, AMRO principal economist, who led the mission.

“Growth will be driven mainly by robust private consumption, while private investment and exports will face challenges from US tariff policies,” he explained.

Meanwhile, inflation has eased and is expected to remain contained within the Bangko Sentral ng Pilipinas’s target band, rising from 1.8 per cent in 2025 to 3.2 per cent in 2026.

Softer global commodity prices and recent tariff cuts on rice have helped temper consumer prices, even as demand remains firm.

The current account deficit is likely to persist, but AMRO noted steady financial account inflows and solid banking sector fundamentals.

Profitability remains strong, non-performing loan ratios are low, and lenders continue to hold ample liquidity and capital buffers.

Monetary policy has shifted into an easing cycle, while fiscal consolidation is proceeding gradually to preserve space for growth-supportive spending.

Still, AMRO warned of risks from global trade tensions, slower growth in key trading partners, and renewed inflationary pressures.

Structural constraints, including infrastructure gaps and weak manufacturing capacity, could also weigh on medium-term prospects.

To strengthen resilience, AMRO recommended that Manila accelerate fiscal consolidation while upgrading infrastructure and refining its growth strategy.

Policy priorities include deepening financial markets, enhancing monetary policy transmission, and reinforcing the framework for climate and disaster preparedness.

The report also urged investments in human capital and labor upskilling to help the economy adapt to rapid advances in artificial intelligence.

The mission, which ran from September 2 to 19, was led by Choi and included policy discussions with AMRO director Yasuto Watanabe and chief economist Dong He.