Philippines Set to Reclaim Growth Momentum, UN Projects Acceleration Beyond 2025 Downturn

The Philippine economy’s growth trajectory shows signs of reinvigoration following a temporary slowdown. According to the UN’s World Economic Situation and Prospects report, the region’s second-largest developing economy is positioned for recovery, with the Philippine GDP expected to accelerate to 5.7% in 2026 before climbing further to 6.1% in 2027.

These projections align with Manila’s revised economic targets, placing the forecasts squarely within the government’s 5-6% objective for 2026 and 5.5-6.5% range for 2027. The recovery momentum stems from multiple tailwinds: steady consumer spending bolstered by low price pressures, a resilient labor market, and consistent inflows from overseas workers supporting household purchasing power.

2025: A Year of External Headwinds

The Philippine GDP growth likely contracted to around 5% in 2025, missing the government’s initial 5.5-6.5% projection. This underperformance reflected aftermath of governance controversies surrounding flood control infrastructure projects, which dampened both business investment appetite and consumer sentiment. Economy officials attributed the slowdown to approximately 4.8-5% territory. The Philippines Statistics Authority will provide definitive fourth-quarter and full-year 2025 figures on January 29, offering clarity on the actual contraction depth.

Regional Competitiveness: Philippines Among Top Performers

Despite the 2025 stumble, the Philippine economy maintains Southeast Asia’s second-strongest growth credentials. Vietnam leads regional expansion forecasts at 6%, trailed by the Philippines at 5.7% for 2026. Further down the rankings: Cambodia (5.1%), Indonesia (5%), Malaysia (4%), Laos (3.8%), Timor-Leste (3.3%), Myanmar (3%), Thailand (2%), Singapore (1.8%), and Brunei (1.5%).

The 2027 outlook reinforces this positioning. Vietnam continues as the growth champion at 6.2%, with the Philippines maintaining second place at 6.1%, followed by Cambodia (5.5%), Indonesia (5.2%), Malaysia (4.5%), Laos (4%), Timor-Leste (3.2%), Myanmar (3%), Thailand (2.6%), Singapore (2%), and Brunei (2.1%).

Inflation Trajectory Steadies Consumer Purchasing Power

Price stability forms another pillar supporting the recovery narrative. The UN anticipates headline inflation moderating to 2.3% in 2026 and 2.8% in 2027—both figures undershooting the BSP’s more conservative estimates of 3.2% and 3% respectively. This divergence suggests monetary policy may prove more effective than central bank projections, further sustaining consumer spending capacity.

Inflation already showed improvement momentum, reaching 1.8% in December and averaging just 1.7% for the full-year 2025, validating the softer price environment underpinning demand resilience.

Outperforming Regional Averages

The Philippine GDP growth forecasts substantially exceed the UN’s projected 4.4% average for the broader East Asia region across both 2026 and 2027, positioning the Philippines as an outperformer within its economic peers.