The growth of the Philippine economy is projected to slow to 5.6 percent in 2025, according to a recent report from the Organization for Economic Cooperation and Development (OECD).

This forecast marks a continuation of disappointing growth figures, as the country recorded a GDP growth rate of 5.7 percent in the previous year and 5.5 percent in 2023, both falling short of the government’s targets of six to eight percent.

The OECD report, titled "OECD Economic Outlook, Volume 2025 Issue 1: Philippines: Tackling Uncertainty, Reviving Growth," emphasizes a potential deceleration in growth stemming from broader economic conditions, specifically citing the risk of significant downturns in major economies such as the United States and China.

Such downturns could diminish demand for Philippine exports and affect remittance inflows that are crucial for domestic consumption and investment.

Despite these challenges, the OECD projects that exports of goods and services will grow by 5.5 percent by year-end, surpassing the forecasted 3.3 percent increase from 2024. However, this growth is expected to slow to 2.1 percent in the following year, indicating a more subdued outlook.

The projected trade deficit is anticipated to decrease marginally, with net exports expected to decline by 1.2 percent, compared to a forecasted drop of 1.3 percent in 2025. This contraction in net exports has been identified as a significant factor in the Philippines' lackluster economic performance during the first quarter of the year, where growth registered at a lower-than-expected 5.4 percent.

Consumer spending in the Philippines is estimated to rise from 4.9 percent in 2024 to 5.7 percent in 2025, with further acceleration to 6.5 percent anticipated in 2026. The OECD also identified the introduction of recent reforms aimed at reducing barriers to foreign direct investment (FDI) as a positive development that could enhance investment levels.

Total real investment is projected to grow by three percent in 2025, significantly lower than the rates seen in prior years, although it is expected to rebound in 2026. This recovery is linked to a reduction in borrowing costs, with the Bangko Sentral ng Pilipinas having recently lowered the key borrowing rate by 25 basis points to 5.5 percent, with further cuts anticipated.

The OECD report cautioned that rising global trade tensions are likely to exert additional pressure on external demand and export revenues, complicating the economic landscape.

To foster more robust economic growth, the organization advised policymakers to continue pursuing reforms that enhance competition.

Specific recommendations included the amended Public Services Act, which has sought to reduce barriers to foreign investment, and streamlining regulations in key sectors such as energy, telecommunications, and transport.

The report highlighted that addressing labor market challenges is essential for increasing productivity and providing workers with greater job stability.

Recommendations included lowering non-wage labor costs and enhancing labor flexibility.

Furthermore, the OECD emphasized the importance of improving women’s participation in the labor force through better access to affordable childcare and flexible working arrangements.

Enhancing this participation could leverage the Philippines' human capital, thereby fostering economic growth and reducing gender disparities in employment.