The Philippines is anticipated to record the second highest economic growth in Southeast Asia this year, despite a downgrade in its growth outlook due to external challenges, according to a report released by the Asian Development Bank (ADB).
In its Asian Development Outlook July 2025 report published on Wednesday, the ADB projected that Philippine economic growth will settle at 5.6 percent for the year. This growth rate is second only to Vietnam’s expected 6.3 percent.
Other Southeast Asian countries are projected to grow as follows: Indonesia at 5 percent, Malaysia at 4.3 percent, Singapore at 1.6 percent, and Thailand at 1.8 percent. For 2026, the growth rate for the Philippines is expected to slightly increase to 5.8 percent.
However, the ADB’s latest projections are lower than its previous forecasts of 6 percent for 2024 and 6.1 percent for 2025, reflecting the impact of external headwinds. The Philippine economy grew by 5.4 percent in the first quarter of the year.
“Domestic demand grew 6.7 percent, supported by easing inflation and monetary policy. However, net exports dragged on growth as brisk imports outpaced exports,” the ADB noted. The manufacturing index (PMI) also showed a slight recovery, rising to 50.7 in June from 50.1 in May.
The report highlighted positive consumer sentiment in the near term, with unemployment remaining low at 3.9 percent in May and remittance growth of 3.0 percent helping to sustain household spending. However, the ADB pointed out that business confidence has softened amid heightened global policy uncertainties.
The ADB indicated that economic forecasts for most Southeast Asian countries have been downgraded for 2025 and 2026 due to the ongoing global growth slowdown and increased trade uncertainty. “Weaker external conditions have hurt business and consumer sentiment and threaten to disrupt investment in the subregion,” it stated.
“Except for Indonesia, the largest economy in the subregion, all Southeast Asian economies are expected to post weaker growth in the next two years.”
Additionally, the ADB revised its 2025 headline inflation projection down to 2.2 percent from a previous forecast of 3 percent. For 2026, inflation is expected to settle at 3 percent.