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2025 Recap

TRADE TALK. US President Donald Trump welcomes President Ferdinand Marcos Jr. to the Oval Office on July 22, 2025.TRADE TALK. US President Donald Trump welcomes President Ferdinand Marcos Jr. to the Oval Office on July 22, 2025.

[Vantage Point] A year of reckoning: Which way, Philippines?

2025/12/30 09:00

As the Philippines enters the new year, it carries two heavy but inseparable ledgers: one economic and one political. Both were written painstakingly over the past 12 months, line by line, decision by decision — sometimes with discipline, often with hesitation, and occasionally with costly contradiction. For investors, citizens, and policymakers alike, the question is no longer whether the country has momentum because it does. The more urgent question is whether it has coherence.

Year 2025 was not a collapse year, but it was also not the breakout year many had hoped for. Economic growth remained respectable by regional standards, yet stubbornly below the country’s full potential.

Inflation, while easing from its post-pandemic and commodity-shock peaks, left scars on household balance sheets. Interest rates stayed elevated long enough to cool credit appetite and test highly-leveraged corporate structures. The peso found moments of stability, but never fully escaped the gravitational pull of global dollar strength and persistent trade gaps.

Still, resilience was unmistakable. Consumption — long the Philippine economy’s most reliable engine — proved difficult to kill, even as food prices pinched and borrowing costs rose. Remittances continued to act as a quiet stabilizer, cushioning external shocks and propping up domestic demand. Infrastructure spending, though unevenly executed, kept the long-term growth narrative intact, reminding markets that concrete, steel, and logistics still matter in a country of more than 110 million people.

Yet beneath the headline numbers lay a more uncomfortable truth: growth increasingly felt defended rather than accelerated. Too much of the year was spent managing rather than decisively neutralizing risks that were already visible: supply-side inflation, governance concerns, and regulatory uncertainty, to name a few. Economic policy often sounded right, but moved cautiously. Markets listened, but waited.

Politically, the year was defined by an uneasy calm. The administration projected stability, continuity, and pragmatism — qualities investors generally welcome. But stability without urgency carries its own cost. Governance reforms advanced in rhetoric more than in execution. Anti-corruption drives surfaced in waves — sometimes forceful, sometimes selective, often reactive. The result was a political environment that avoided chaos, but fell short of conviction.

This ambiguity mattered. Capital is patient only to a point. Foreign investors, already skittish about emerging markets amid global tightening cycles, looked for clearer signals: faster regulatory decisions, stronger institutional accountability, and a sharper break from legacy practices that blur the line between political power and economic privilege. Too often, those signals arrived late or not at all.

What the past year ultimately revealed is that the Philippine story is no longer about raw potential. That debate has been settled for decades. It is now about execution risk. Investors are not asking whether the country can grow at 6% or 7% again. They are asking whether the institutions governing that growth are strong enough to make it durable, inclusive, and credible.

As the new year opens, the economic outlook offers both relief and challenge. Inflation is easing, giving the Central Bank room to maneuver. Rate cuts, once hypothetical, are now plausible. This could revive credit, lift investment sentiment, and offer breathing space to overextended balance sheets — from households to conglomerates. But easier money will only magnify existing structures. If capital flows into productive investment, the payoff could be substantial. If it merely reflates asset prices or masks inefficiencies, the opportunity will be squandered.

Fiscal policy faces a similar fork in the road. Debt levels remain manageable, but no longer trivial. Every peso spent now carries a higher burden of justification. Infrastructure must deliver returns, not just ribbon-cuttings. Social spending must translate into measurable outcomes, not permanent dependency. The margin for populist miscalculation has narrowed.

Politically, the coming year will test whether stability can evolve into reform. Midterm dynamics are already shaping incentives. History suggests this is when difficult decisions are postponed, compromises multiply, and accountability thins. But history is not destiny. A credible push on governance — real transparency in public-private partnerships, consistent enforcement of market rules, and visible consequences for abuse — could fundamentally reset investor perception.

The Philippines today sits at a familiar crossroads, but with less room for error than in past cycles. Demographics remain favorable, the consumer base is large, and strategic geography still matters in a fragmenting global economy. These are strengths many countries envy. Yet they no longer guarantee patience from markets or forgiveness from citizens.

The past year was a reminder that resilience is not the same as progress. The year ahead will determine whether the country merely absorbs shocks — or finally converts stability into sustained, higher-quality growth. For the Philippines, the choice is clear, even if the path is not: reform decisively and earn a re-rating, or drift cautiously and accept mediocrity dressed as resilience.

What the numbers say

As we step into a new year, the country carries an economic ledger much larger — and more complex — than the simple growth figures that once defined its narrative. Investors, policymakers and global partners are asking the same question: Is the economy ready to transcend cyclical resilience and embrace transformative expansion? The answer today, as culled by Vantage Point, in fresh data from international institutions and local authorities, is a qualified “yes” — but with caveats that aren’t going away.

Growth still solid, but slowing

Economically, the Philippines remains one of Southeast Asia’s fastest-growing markets, yet growth is decelerating from the heady post-pandemic rebound. Real gross domestic product (GDP) expanded by 5.5% year-on-year in the second quarter of 2025, outpacing many regional peers. Yet, as the year progressed, momentum softened. Multiple forecasts — from regional bodies to local authorities and private economists — now place full-year GDP growth closer to 5.2-5.3%.

The International Monetary Fund (IMF) and the World Bank paint similar pictures: growth remains above 5% and competitive globally, but below earlier targets and pre-pandemic trajectories. Notably, the Department of Finance (DOF) itself has acknowledged that 2025 growth may settle nearer to 4.7-4.8%, well under the official 5.5-6.5% goal.

Meanwhile, gross national product (GNP) — which includes net income from abroad — has climbed to historic highs in absolute terms, touching over ₱6.68 trillion in the third quarter of 2025. This suggests that income earned by Filipinos overseas and returns from foreign investment remain structural strengths.

Benign inflation, a double-edged sword?

Inflation presents a nuanced victory. Consumer price inflation slipped to around 1.5% in late 2025, comfortably below the Central Bank’s 2-4% target range.This benign price environment has afforded the Bangko Sentral ng Pilipinas (BSP) the flexibility to cut policy rates repeatedly to spur credit and investment — a notable shift from the tight monetary stances of the pandemic era.

But low inflation also reflects weaker demand in investment and external sectors, not simply price stability. That’s the precise challenge facing Philippine policymakers: avoid deflationary complacency, while nurturing deeper private sector investment beyond consumption spending.

Vantage Point culled data from the BSP, IMF and World Bank to create this graph: As headline GDP growth cools and the peso remains under pressure, GNP continues to outpace domestic output — highlighting the Philippines’ dependence on external income even as structural limits cap post-rebound growth. The next phase hinges not on resilience, but on reform. Sources: Bangko Sentral ng Pilipinas, International Monetary Fund, World Bank; 2025E = estimates.

Political variables shaping the numbers

Macroeconomic indicators alone don’t tell the whole story. Investors are increasingly sensitive to political undercurrents that could reshape growth trajectories.

International benchmarks such as Transparency International’s Corruption Perceptions Index continue to place the Philippines in a challenging light, with a score of 33 out of 100 and a rank around 114th of 180 countries. While this represents a slight improvement over prior years, it remains below regional and global averages, suggesting persistent governance gaps.

Domestically, these perceptions have translated into visible political unrest. In 2025, mass protests erupted nationwide in response to a sprawling corruption scandal involving flood control and infrastructure funds — one of the largest civic mobilizations in years. Subsequent criminal charges have ensnared dozens of political and business figures, including high-level legislators, underscoring both the depth of the problem and the political will to pursue accountability, however unevenly.

At the same time, recent surveys from the Philippine Observatory on Democracy indicate rising public concern over corruption, disinformation and civic disengagement — signals that democratic legitimacy may be as consequential an economic variable as tax policy or tariff rates.

Global context: External risks and competitive realities

Externally, the national economy is vulnerable to trends well beyond its borders. Efforts to diversify exports face headwinds from shifting US trade policy and global tariff regimes which, analysts say, could dampen export competitiveness and investment flows in 2026.

Compared with its peers in the Association of Southeast Asian Nations (ASEAN), the Philippines sits in a mid-tier competitive band — beating some neighbors, but still trailing the likes of Indonesia and Vietnam in composite influence measures that weigh economic strength, diplomacy, and technological capacity.

Looking forward: The road to sustainable growth

So where does this leave the country in the year ahead?

On the economic front, the Philippines has the fundamentals — the demographic dividend, robust remittances, resilient consumption — to sustain growth. But converting these advantages into higher, sustained investment and productivity gains will require sharper policy execution, deeper structural reform, and more attractive conditions for long-horizon investors.

On the political front, the unfolding drama around governance and corruption could be a tipping point. Clean, transparent institutions aren’t just moral imperatives — they are economic multipliers that unlock investor confidence, reduce risk premia, and widen the tax base.

The Philippines’ growth story is far from finished; it has merely entered a new chapter — one in which policy coherence, not just headline figures, will define the country’s place on the global economic stage. If the next year is about choices, then the most consequential one is this: Will the Philippines reinforce its growth foundations with credible governance, or will political ambiguity undermine its economic promise?

Quo Vadis, Philippines? Markets are watching, and increasingly so its own citizens. – Rappler.com

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