The Philippine economy grew by 5.6 percent in 2024, slightly faster than the previous year’s 5.5 percent expansion but falling short of the government’s 6 to 6.5 percent growth target and economists’ 5.7 percent median forecast. Authorities attributed the weaker-than-expected performance to high inflation and interest rates, damage from strong typhoons, and weak global demand for Philippine exports. The slowdown in consumer spending and contraction in agricultural output during the fourth quarter weighed down the economy’s overall performance during the year. As of the latest available data from The World Bank, the Philippines’ gross national income per capita was estimated at around $4,230 in 2023, missing the government’s longstanding goal to become an upper middle-income economy with an income range of $4,516 to $14,005.
The Philippine government expects the economy to expand 6 to 8 percent in 2025, citing an improving economic outlook due to lower inflation, lower interest rates, and higher election-related spending for the May midterm elections. Multilateral institutions also forecast the Philippines to remain among the fastest-growing economies in Southeast Asia, due to sturdy macroeconomic fundamentals, resilient remittances, a strong business process outsourcing industry, and sustained investment-friendly reforms. However, the International Monetary Fund suggests the Philippines could miss its government target and grow only by 5.5 percent in 2025 due to the impact of U.S. tariffs on global trade and investments.
Inflation averaged 3.2 percent in 2024, below market expectations and within the Bangko Sentral ng Pilipinas’ (BSP, Central Bank) 2 to 4 percent target range for the first time in three years. Key to cooling inflation was the June 2024 government’s reduction in the rice tariff – the country’s food staple – from 35 percent to 15 percent. The more manageable inflation environment has allowed BSP to cut benchmark interest rates by 100 basis points since August 2024. BSP acknowledges a 5.5 percent benchmark interest rate policy stance remains restrictive – providing space to cut interest rates further in 2025. For 2025, BSP forecasts inflation to settle lower at 2.3 percent, due to declining international oil prices and weaker global economic activity.
The balance of payments (BOP) saw a surplus of $609 million in 2024, significantly lower than the previous year’s $3.7 billion surplus. The reduction came following a wider current account deficit during the period amounting to $17.5 billion (equivalent to 3.8 percent of GDP), from $12.4 billion in 2023 (2.8 percent of GDP). Lower net receipts in trade in services ($14.6 billion from $18.2 billion in 2023) and an increased merchandise trade gap ($68.7 billion from $66 billion in 2023) caused a higher current account deficit. These were partly offset by net increases in primary and secondary income accounts, supported by sustained inflows of overseas Filipino remittances. Meanwhile, the capital account registered net receipts amounting to $72 million in 2024 while the financial account posted $17.6 billion net inflows in 2024. The financial account net inflow was driven by the reversal of the portfolio investment account to $3.6 billion net inflows, from $3.5 billion net outflows a year ago, and by higher net inflows in direct investment accounts.
The Philippine stock market’s benchmark index closed at 6,528.79 points in 2024 – exceeding the previous year’s closing (6,450.04 points) but continued to underperform relative to pre-pandemic levels in 2019. Foreign participation in the Philippine stock market makes up roughly half of the total trading value, which renders the market highly vulnerable to global headwinds including policy decisions of the U.S. Federal Reserve and global geopolitical tensions, among others. Meanwhile, the local currency bond market has $233 billion in outstanding debt securities, more than double the $118 billion value in 2019. However, government securities have been the core driver of bond market expansion. Corporate issuances have struggled to gain momentum, and those that succeed are highly skewed to large corporations. The local bond market also lags relative to its regional peers in Asia and is considered as one of the smallest markets in terms of absolute size.
Net foreign direct investment (FDI) inflows reached $8.93 billion in 2024, slightly higher than the $8.92 billion record in 2023 but still below the government’s $9 billion target. The United States is among the Philippines’ top investors – with total investments of around $893 million in 2024. However, the Philippines continues to lag similarly sized and ranked ASEAN neighbors in attracting FDI. The Philippines also maintained its lower competitiveness ranking at 52nd out of 64 economies in the 2024 Institute for Management Development World Competitiveness Report, reflecting persistent challenges in infrastructure and business efficiency. Investors also repeatedly cite government red tape, regulatory uncertainties, a slow judicial system, inconsistent application of laws by Local Government Units (LGUs), and corruption as challenges to doing business in the country. The Philippines passed reform measures to ease restrictions on foreign ownership in many sectors.
The 2022 Amendments to the Public Service Act (PSA) allowed 100 percent foreign “public services,” including railways, airports, and expressways, but maintained foreign ownership restrictions in six “public utilities:” (1) distribution of electricity, (2) transmission of electricity, (3) water and wastewater pipeline distribution systems, including sewerage, (4) petroleum and petroleum products pipeline transmission systems, (5) seaports, and (6) public utility vehicles. The 2022 Retail Trade Liberalization Act (RTLA) lowered the paid-up capital requirement for foreign-owned retail trade businesses, and the quantity of locally manufactured products foreign-owned stores are required to carry. The 2022 amendments to Foreign Investment Act (FIA) eliminated restrictions of foreign ownership of export enterprises and opened most areas except those subject to nationality requirements outlined in the 1987 Constitution and in the Philippines’ Foreign Investment Negative List.
To further attract foreign investment, the Philippines passed the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) in November 2024, intended to improve the investment climate and attract new investors. The CREATE MORE Act expanded investment incentives by extending the duration of tax exemptions for up to 27 years, adding tax deductible expense items and lowering corporate income tax for companies under enhanced deductions regime, clarifying value-added tax zero-rating rules, and streamlining local tax policies. The CREATE MORE Act follows on the heels of 2021’s Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which reduced the corporate income tax and provided other incentives for foreign investors.
BSP’s gross international reserves (GIR) stood at $106.84 billion as of end-December 2024, down from $108.49 billion as of end-December 2023. As of March 2025, GIR remained stable at $106.7 billion. The latest GIR level represents a more-than-adequate external liquidity buffer equivalent to 7.4 months’ worth of imports of goods and payments of service and primary income.
In 2024, major credit rating agencies Moody’s, Standard & Poor’s (S&P), and Fitch Ratings maintained an investment grade sovereign credit rating for the Philippines. In April 2025, Fitch continued their “stable” outlook for the Philippines, owing to strong medium term economic growth prospects, limited direct exposure to trade tensions, and sustained but gradual fiscal consolidation efforts. The Japan Credit Rating Agency (JCRA) in March 2023 similarly affirmed the Philippines’ “A-” credit rating with a stable outlook. S&P has assigned a “BBB+” rating since April 2019, two notches above the minimum investment grade and just below the “A” scale; Fitch (“BBB”) and Moody’s (“Baa2”) are two steps below “A” ratings.
As of December 2024, the Philippine labor force was approximately 50.19 million workers, with a median age of 25 years. The average unemployment rate eased to 3.8 percent in 2024, from a 4.4 percent average in 2023. Job quality remains a challenge, as the underemployment rate remained high at 11.9 percent in 2024, equivalent to about six million people seeking additional work and longer working hours. This nonetheless is an improvement from last year’s 12.3 percent underemployment rate. Meanwhile, the poverty rate fell to 10.9 percent in 2023, from 18.1 percent in 2021. This is equivalent to more than 2.99 million living below the domestic poverty threshold of about $247 in monthly income.
U.S.-Philippine bilateral goods trade grew by 3.99 percent in 2024 to $23.9 billion. However, headwinds in renewed supply chain bottlenecks are still observed. In 2024, the Philippines ranked as the 37th largest export destination for U.S. products and the 31st largest source of U.S. merchandise imports. The U.S. trade in goods deficit with the Philippines was $5.3 billion in 2024.
The United States was the Philippines’ fifth largest source of imports in 2024, with a 6.4 percent share of the country’s imports. The top two import sources of the Philippines were China and Indonesia, with 25.8 percent and 8.3 percent import share, respectively. The United States was the largest export market of the Philippines, with 16.6 percent of total export value in 2024. It was followed by Japan which accounted for 14.1 percent. The Philippines’ largest global export category by value is electronic integrated circuits (including semiconductors).
Political Environment
Visit the State Department’s website for background on the country’s political and economic environment.