OECD forecasts persistent economic momentum in the Philippines
Fresh Perspective on Philippines' Economy:
Philippines' economic growth remains stable, according to the Organization for Economic Cooperation and Development (OECD). Cyrille Schwellnus, OECD head of Indonesia and Philippines desk, predicts a 5.6% growth this year, accelerating to 6% in 2026. Consumer spending is anticipated to be the main driver, supported by a robust labor market and government spending, especially in the first quarter of 2023, boosted by midterm elections.
Schwellnus noted that the Philippines is less exposed to slowing global trade compared to other Southeast Asian economies due to its reliance on domestic demand. However, export growth is projected to weaken due to escalating global trade tensions. Inflation is expected to remain within the government's target this year and in 2025-2026, enabling the Bangko Sentral ng Pilipinas (BSP) to further ease policy rates.
Looking ahead, policy reforms are crucial to increase productivity and overall growth. The OECD suggests key areas for improvement, such as:
- Streamlining regulations across sectors like electricity and telecommunications to enhance competition, increase efficiency, and attract investment.
- Reducing non-wage labor costs to make employment more attractive to businesses.
- Implementing employment regulations that introduce flexibility and facilitate job creation, while ensuring fair treatment for workers.
Continued implementation of these reforms can expand opportunities for workers and strengthen the foundations of economic growth. The Philippines has a unique opportunity to lead in sustainable infrastructure and inclusive economic development as it co-chairs the OECD's Southeast Asia program.
- The government spending in the Philippines, particularly in the first quarter of 2023, is anticipated to be bolstered by midterm elections, demonstrating the interplay between politics and economy.
- The OECD predicts that the Philippines' economic growth will accelerate to 6% in 2026, signifying a promising outlook for this Southeast Asian country's business industry.
- Inflow of investments may increase with efforts aimed at streamlining regulations across sectors like electricity and telecommunications, as suggested by the OECD.
- The finance industry in the Philippines might benefit from policy reforms that reduce non-wage labor costs, making employment more attractive to businesses and potentially spurring economic development.
