By Bjorn Biel M. Beltran, Special Features and Content Assistant Editor
The story remains promising for the Philippines’ economic narrative. But there is yet a long road ahead before the country transition into the next chapter of reaching “upper middle-income status”, and 2025 is simply the first step.
National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan is confident that the Philippines would reach the official status this year. Upper middle-income countries are those economies recognized by the World Bank with gross national income per capita — in other words, the average income generated by residents inside the country as well as by Filipinos abroad — ranging between $4,516 and $14,005 for the fiscal year 2025.
Many leaders share his optimism. Frederic C. DyBuncio, SM Investments Corp. (SMIC) president and CEO, said in an interview that there are several encouraging trends that bolster the business community’s hope in the Philippines’ unimpeded growth.
“Business confidence has remained stable despite economic challenges, suggesting strong adaptability in the business sector. Companies have learned to manage foreign exchange and interest rate volatility effectively,” he said.
Jeffrey C. Lim, president of SM Prime Holdings, echoed his sentiments. “We expect the Philippine economy to continue its growth trajectory into 2025. The economic team’s GDP target of over 6.0% is attainable because of moderating inflation, strong domestic demand and robust government spending,” he said.
Building resilience amidst volatility
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Inflation remains a sticking point. Organizations like the Asian Development Bank maintained their projections on the Philippine economy at 6.2% for 2025, with the expansion expected to be driven by broad-based domestic demand and supported by lower inflation and interest rates. The Bangko Sentral ng Pilipinas predicts inflation this year to be at an average 3.3%.
“If inflation continues to moderate, we expect an improvement in the interest rate environment, which could benefit both businesses and consumers. Any further moderation in inflation is likely to restore consumer confidence, creating more growth opportunities in consumer-focused sectors,” Mr. DyBuncio added.
“For me, there are two things I look forward to this 2025. The first is a more stabilized inflation rate. Prices of goods have drastically increased since 2022 and continued to rise until 2024. But, hopefully, prices are now stable and spending power has slightly adjusted as well. I look forward to this so that there will be less shocks to the market and the economy can move as predicted,” Pammy Olivares-Vital, president and CEO of Ovialand, said in an interview.
“Next would definitely be political — globally the return of President Trump and locally our own local elections. This activity always triggers a boost in spending, so hopefully this will spur economic activity.”
Many global organizations like the International Monetary Fund have expressed concerns regarding the potential impact of President Donald J. Trump’s return to office on the global economy, as his proposed economic policies — which include significant tax cuts, import tariffs, deregulation, and mass deportations — could aggravate United States’ (US) inflation, disrupt global trade, and lead to labor shortages in certain sectors.
The import tariffs, in particular, could reduce global economic growth of 2.7% in 2025 by 0.3 percentage point, according to the World Bank, if America’s trading partners retaliate with tariffs of their own. This potential slowdown could have a ripple effect on emerging markets like the Philippines, influencing key factors such as foreign exchange stability and trade dynamics.
“Businesses are particularly sensitive to foreign exchange movements, and recent volatility in the peso has impacted import costs significantly. We must also monitor global monetary policy, especially decisions from the Federal Reserve, which could affect peso stability,” SMIC’s Mr. DyBuncio said.
He added that Mr. Trump’s return could bring a mix of opportunities and challenges for the country, with its strategic location and strong economic ties with the US, especially in areas such as trade.
“In terms of risks, protectionist policies could lead to trade tensions, particularly in sectors where the Philippines is dependent on US markets. The Philippines will need to adapt to this evolving political landscape while ensuring it maximizes potential bilateral advantages,” he said.
Ms. Olivares-Vital remains positive. “Regardless of some of his surprising statements, President Trump is a Republican, and his right leaning tendencies are aimed at strengthening their economy. And when the US is strong, I believe, somehow we positively benefit from it as well,” she said.
“The return of Donald Trump to the White House introduces a significant new dimension to global trade and Philippine-US relations,” Mr. Lim of SM Prime said, adding that changes in US policies could present opportunities for the Philippines to diversify its partnerships and strengthen its domestic industries and competitiveness.
“The Philippines has consistently shown resilience and adaptability in navigating changing global dynamics. I think the government will be proactive and strategic in pursuing opportunities for collaboration that enhance relationships while safeguarding our national priorities,” he said.
Bringing the Philippines onto the global stage
At this crucial juncture in the Philippines’ development, the country has the potential to become a key player in global supply chains, especially in the context of escalating trade tensions between the US and China.
The country’s natural geographic advantage places it at the crossroads of major trading routes, providing access to key markets in Asia, the Americas, and Europe, thus making it a natural hub for logistics, manufacturing, and regional trade. That is, if the country plays its cards right.
“The Philippines faces the complex task of maintaining robust trade relationships with both the US and China, its two largest trading partners,” Mr. DyBuncio pointed out. “Key sectors like electronics and manufacturing are particularly vulnerable to disruptions in US-China trade relations due to their dependence on raw materials and components from both countries.”
“Balancing trade relations with the US and China also requires strategic diplomacy and economic foresight from the government. While tensions between these global powers present risks, they also underscore the importance of diversifying markets, fostering domestic capabilities, and ensuring resilience across key sectors.”
He also noted that the Philippine government can ideally take a multifaceted approach to strengthen economic ties with the US, including enhancing bilateral trade agreements to secure favorable terms for Filipino exports and attract US investments, as well as fostering goodwill through people-to-people diplomacy by promoting cultural, educational, and tourism exchanges.
Additionally, he said that the government could address immigration and remittance-related issues by proactively safeguarding the welfare of Filipino workers abroad and ensuring the steady flow of remittances.
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Mr. Lim added that strengthening economic ties with the US calls for proactive and constructive diplomacy, focusing on shared priorities such as technology, education, and infrastructure development.
“Regarding immigration and remittances, monitoring potential policy changes that could affect Filipino workers and their families is essential. The government can continue to advocate for the welfare of our overseas workforce while exploring opportunities to diversify markets and enhance economic resilience,” Mr. Lim said.
As the Philippines is a primarily consumer-driven economy, keeping the country’s supply chains away from disruption is crucial for maintaining steady growth — a fact that Ms. Olivares-Vital of Ovialand can attest to.
“For me personally, the global political tensions have affected our supply chain,” she admitted.
“Global supply chains have been significantly disrupted by geopolitical tensions and the lasting effects of the pandemic, creating challenges for local businesses such as supply disruptions and rising costs,” Mr. Lim said.
“To mitigate the impact of these geopolitical risks on the Philippine economy, the government can focus on key strategies such as investing in infrastructure to improve logistics efficiency, promoting local manufacturing to reduce reliance on imports, and implementing policies that attract foreign direct investment to bolster local employment, competitiveness and economic resilience.”
Amid such a backdrop, regional cooperation becomes even more critical.
“In an era of rising global trade tensions and geopolitical uncertainties, regional cooperation through organizations like ASEAN and trade frameworks such as the Regional Comprehensive Economic Partnership (RCEP) has become increasingly vital for the Philippines,” Mr. DyBuncio said.
These agreements, he noted, can help the Philippines diversify its trade partners, stabilize exports, and promote economic integration within the region, providing a buffer against external shocks.
“Global supply chain disruptions, driven by geopolitical tensions, trade disputes, and natural disasters, are increasingly affecting local businesses in the Philippines,” he said.
Mr. Lim underscored how crucial regional cooperation was for sustained growth. Engagement through ASEAN and participation in agreements like RCEP provide the Philippines with access to broader markets, diversified trade opportunities, and collective bargaining power. Such collaboration strengthens economic stability and creates avenues for growth amid global uncertainties.
“The government can take the following measures to protect the Philippine economy: encourage localization of supply chains by supporting local industries to produce key components and reduce reliance on imports; invest in technology by enhancing digital infrastructure to improve supply chain tracking and flexibility; and foster trade agreements by building strong trade relationships with regional and international partners to buffer against global disruptions,” Mr. DyBuncio suggested.
The ultimate test of sufficiency
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Mr. DyBuncio further highlighted how global trade realignments could be a boon for the Philippines, while also posing significant risks.
“To position itself as an attractive investment destination, our country must focus on creating a conducive environment for businesses, leveraging its strategic location, and addressing key areas of improvements that include: improving the business environment by streamlining regulations, reducing red tape, and enhancing the ease of doing business; promoting sustainability by fostering renewable energy investments to attract foreign capital in green industries; and enhancing infrastructure through investments to improve connectivity and logistics, which can enhance overall business efficiency and support growth in both domestic and foreign investments,” he said.
In renewable energy, specifically, the Philippines has the potential to become a global powerhouse. In the 2024 Climatescope Report by BloombergNEF, the country came second behind India as the most attractive emerging market for renewable energy investments — remarkably coming ahead of mainland China. This was a climb from fourth place in 2023 and an impressive leap from 20th place in 2021.
However, growth should not be sought for growth’s sake. The country should not lose sight of what such a potential future really means. Manny V. Pangilinan, who serves as chairman and president of Metro Pacific Investments Corp. alongside his leadership roles in companies like PLDT, Smart, and Meralco, had a more nuanced view of such promising prospects.
“We view [ourselves] in the traditional perspective of delivering goods and services for a profit,” he shared. “That’s what our owners want. That’s what they demand of the stores, managers, and the business. So that’s our starting premise.”
“But beyond that, there is a larger social component dimension to our business — and that is the improvement of lives and the welfare of everybody. The ultimate test of our sufficiency as a business is really how well we have done better for our people, for our customers, and generally the people in the Philippines in terms of the job and the business that we conduct.”
“And we believe in that is what defines us. That defines our group. We have a very heavy responsibility to our people in the way we do our business.”
Mr. Pangilinan commented that Mr. Trump’s policies on reinvesting in fossil fuels like gas and coal reflected the same idea: that leaders should focus on what they believe their people need. He cited the example of what he had seen doing social work, of children being forced to forego their education sell scrap metal because of poverty.
“Sometimes I wonder whether they worry about whether the air is pure and the water is clean. They must worry more about the food on the table and shirts on their back. And whatever else are essential to human existence,” he said.
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Whether or not the Philippines seeks to become a global leader in renewables, or simply achieve its goal of achieving upper middle-income status this year, growth must serve the purpose of benefitting lives, first and foremost.
Speaking for SMIC, Mr. DyBuncio said, “As we look ahead to 2025, building resilience and managing risks in our sector remains a top priority. Recognizing the potential challenges posed by global economic slowdowns or recessions, we have implemented strategic measures to strengthen our position and ensure sustainability during periods of uncertainty.”
“While uncertainties remain in the global economic landscape, the SM Group’s proactive approach to risk management and resilience building positions us to navigate potential challenges. By focusing on adaptability, operational efficiency, and financial stability, we are confident in our ability to weather downturns while maintaining long-term growth.”
SM Prime’s Mr. Lim agreed, sharing their own visions of the future. “Our diversified portfolio, encompassing malls, residences, hotels and offices, allows us to manage risks associated with sector-specific downturns. We have also invested significantly in climate-adaptive and disaster-resilient infrastructure to reduce our operating costs and mitigate operational risks, while ensuring business continuity.”
“Whether it be the financial institutions managing exposure to the industry or affecting our supply chain, we need to be extra diligent in all our moves,” Ovialand’s Ms. Olivares-Vital concluded.
“When I reflect on all these extreme scenarios, I go back to one thing which is: How do we add value to the market we serve? This is a constant reminder for us to ensure that every peso we spend and every endeavor we take must have the Filipino middle-class homebuyer in mind. When the homebuyers are happy, profitability follows!”
