UBS AG expects the Philippine economy to grow 5.9% in 2025, down from its previous forecast but still higher than the 5.4% expansion recorded last year, supported by domestic demand and a recovery in private investments.
“The underlying positive growth delta is driven by domestic demand as both investment and consumption accelerate in 2025,” UBS Investment Bank Global Research Senior ASEAN and Asia Economist Grace Lim said in a virtual briefing on Wednesday.
Lim said private investments would gradually recover as financial conditions ease and consumer sentiment improves. Growth in labor income and the slowdown in food inflation are also expected to support consumer spending.
“Consumption is likely to be positive amidst the improving fundamentals and the resilient labor market,” Lim said.
Government spending and sustained growth in the business process outsourcing (BPO) sector are also expected to bolster economic expansion.
Lim described the BPO industry as a “bright spot” for services exports, adding that the sector is likely to remain resilient this year.
On trade risks, Lim said the Philippines’ economy remains relatively insulated from global trade tensions due to its strong domestic orientation, with consumption accounting for over 70% of GDP and investments at 23%.
“In the event of potential trade tariff escalation, the Philippine peso could be a relative outperformer in the region,” she said, adding that while universal tariffs could weaken currencies, any peso depreciation would likely be limited.
UBS also expects the Bangko Sentral ng Pilipinas (BSP) to cut policy rates by 50 basis points this year as inflation remains within target. The central bank reduced rates by 75 basis points in 2024 but kept them steady at its first meeting of 2025, citing global uncertainties.
She noted the BSP’s recent 200-basis point cut in the reserve requirement ratio for universal and commercial banks, effective March 28, as a positive step for liquidity management and financial market development.
