Macroeconomic Prospects of the Philippines in 2025–2026: Restoring Confidence amid Glocal Transitions

As the lead section of the 2024–2025 Philippine Institute for Development Studies Economic Policy Monitor (EPM), this paper examines the overall performance of the Philippine economy in 2024 and, where data allows, extends to the third quarter of 2025. The discussion situates the country’s performance within the evolving global, regional, and domestic economic landscape, highlighting developments that shape growth prospects, price stability, and fiscal and external positions as the economy transitions to upper middle-income country status by 2026 and beyond. Using the descriptive-analytical framework employed in previous EPM editions, macroeconomic trends and conditions are presented, including projections for growth, inflation, trade, employment, external balances, and financial indicators—key variables for evidence-based household, enterprise, and policy decisions. According to the Philippine Statistics Authority, the economy expanded by 5.7 percent in 2024, driven by a continued recovery in industry and services, while headline inflation averaged 3.2 percent, well within the Bangko Sentral ng Pilipinas’ target range of 2 percent to 4 percent. Building on these results, forecasts for 2025 and 2026 are extended, examining potential turning points in output and price movements amid emerging risks. In addition to domestic indicators, the flow of funds from abroad, labor market developments, public spending efficiency, and business and consumer expectations are analyzed as proxies for the economy’s underlying resilience. Continuing the themes of earlier EPM editions, persistent and new vulnerabilities are emphasized, including inflation volatility, exchange rate fluctuations, fiscal constraints, and external shocks such as US tariff escalation, supply-chain realignments under the Regional Comprehensive Economic Partnership, and climate-related disruptions. These factors will determine the country’s ability to sustain inclusive, resilient, and investment-led growth in the coming years. Comments to this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph.