OECD: Phl growth seen at 5.6% in 2025, 6% in 2026

The Philippine economy is expected to sustain stable growth over the next two years, mainly driven by robust consumer spending, according to the Organization for Economic Cooperation and Development (OECD).

In a virtual briefing last week, Cyrille Schwellnus, head of the OECD’s Indonesia and Philippines desk, said the country’s gross domestic product (GDP) is projected to grow by 5.6% in 2025 and further accelerate to 6% in 2026.

He said strong household consumption remains the primary growth driver, supported by a resilient labor market, with unemployment staying below 4% in recent months. Government spending has also contributed to the growth momentum, particularly in the first quarter, due in part to preparations for the midterm elections.

While exports posted gains in recent months, Schwellnus warned that global trade tensions may weigh on future external demand. Still, he noted that the Philippine economy is less vulnerable to a global slowdown because of its heavy reliance on domestic demand.

The OECD also expects headline inflation to remain within the government’s 2% to 4% target range, providing room for the Bangko Sentral ng Pilipinas (BSP) to ease policy rates. Inflation is forecast to average 2% in 2025 and 3.1% in 2026, supported by stable domestic demand and a relatively steady currency.

Despite the favorable outlook, the OECD urged the Philippine government to pursue key structural reforms to strengthen long-term economic performance. Schwellnus cited the need to enhance competition in sectors such as electricity and telecommunications, noting that high power costs hinder business growth and consumer welfare. He said improving competition could help lower electricity prices and encourage more private investment.

Another reform priority is the reduction of non-wage labor costs. Schwellnus proposed shifting part of health insurance funding, which is currently sourced from employer contributions, to general taxation.

He said this would ease the burden on employers and support formal job creation. He also recommended updating employment regulations to enable businesses to generate more formal employment opportunities.

“These reforms would expand opportunities for workers and reinforce the foundations of inclusive and sustained economic growth,” Schwellnus said.