The Philippine economy slowed in 2025 as weak investment, domestic disruptions, and governance issues affected growth, according to the World Bank’s latest Philippines Economic Update released on December 9.
The report said growth is expected to ease to 5.1 percent in 2025, lower than earlier projections, before improving slightly to 5.3 percent in 2026 and 5.4 percent in 2027.
The slowdown is attributed to declining business confidence, a drop in foreign direct investment, and delays in public projects caused by typhoons, floods, and governance concerns.
The World Bank said sustaining growth will depend on stronger public investment execution, credible fiscal consolidation, and structural reforms to enhance competitiveness in tradable sectors, including manufacturing, agriculture, information technology, and tourism.
“The Philippines can leverage its strong economic foundations to implement bolder reforms that can unlock faster, more inclusive growth,” said Zafer Mustafaoglu, World Bank Division Director for the Philippines, Malaysia, and Brunei.
He said reducing barriers to investment and productivity will help create more jobs and strengthen economic resilience.
The report noted that services exports have also weakened due to slower expansion in business services and fewer tourist arrivals. Despite these challenges, growth is expected to regain momentum in the next two years as private consumption strengthens, aided by low inflation, stable employment, and monetary easing.
Investment is also projected to pick up as infrastructure projects advance and recent liberalization measures in telecoms, transport, logistics, and renewable energy begin to improve the business climate.
The World Bank emphasized the need to revive the tradables sector, saying burdensome regulations have slowed manufacturing job creation and limited the number of exporting firms. The report recommends improving competition in logistics and energy, streamlining permits and customs processes, and enhancing investment facilitation to reduce business costs.
It also highlighted the importance of developing emerging urban corridors, where more than 60 percent of urban local governments are located and where many productive firms operate. Strengthening connectivity, targeting investments, and providing policy support would help these areas drive job creation and productivity.
World Bank Senior Economist Jaffar Al-Rikabi said sustained national growth will require continued faster expansion in low- and middle-income regions outside Metro Manila. He said empowering high-potential urban areas to serve as economic engines will generate wider benefits across the country.
The report added that improving local service delivery and enhancing the capacity of local government units, which manage about a quarter of public spending, will be critical to accelerating investment, productivity, and job creation nationwide.
About the Author
