The forecast is underpinned by strong domestic demand, robust private consumption, and improving investment trends.
In a media briefing, Grace Lim, Senior ASEAN and Asia Economist at UBS Investment Bank Global Research, said the Philippines is set to benefit from an improving macroeconomic landscape.
“We see an improving growth outlook in the Philippines – we forecast GDP growth to pick up from 5.6 percent in 2024 to 5.9 percent in 2025, which is close to trend,” she said.
Strong consumption still
UBS expects private consumption to remain a key driver of economic activity, supported by solid labor income growth and easing food inflation.
“Consumption should be aided by the tailwinds of solid labor income growth and gradually easing food inflation which has already played out in 2H 2024,” Lim noted.
The labor market is also holding steady, with the unemployment rate at around 3 percent. With inflation pressures expected to moderate further, consumer spending is seen recovering in the second quarter of 2025. Additionally, the government’s fiscal policies are expected to provide further stimulus, particularly in the first half of the year.
Favorable for expansion
On the investment front, UBS highlighted a more favorable environment for private sector expansion.
“We expect private investment to increase as financial conditions become more accommodative,” Lim said.
The Bangko Sentral ng Pilipinas (BSP) has been proactive in managing liquidity, with successive reductions in reserve requirement ratios and interest rate adjustments. UBS expects the BSP to implement two more rate cuts in 2025, in April and September, in line with its goal of maintaining inflation within target.
Bullish on services
The services sector is another bright spot, with services exports growing at a double-digit pace of 13.5 percent year-on-year as of the fourth quarter of 2024. UBS also pointed to improving financial market conditions as the BSP continues to implement reforms to deepen market sophistication and liquidity.
With Southeast Asia emerging as a strategic hub for foreign direct investments, the Philippines stands to gain from stronger regional trade and investment flows, the investment bank said. UBS remains optimistic about the country’s economic trajectory, noting that the fundamental drivers of growth remain intact.
