MANILA – The Philippines is projected to record the second-highest economic growth in Southeast Asia this year despite a downgraded outlook due to persistent external headwinds, according to the Asian Development Bank (ADB).

In its Asian Development Outlook July 2025 report released Wednesday, the ADB forecast Philippine economic growth to settle at 5.6 percent in 2025. This places the country behind only Vietnam, which is expected to grow by 6.3 percent.

Other Southeast Asian economies are expected to post slower growth: Indonesia at 5 percent, Malaysia at 4.3 percent, Thailand at 1.8 percent, and Singapore at 1.6 percent.

For 2026, the Philippines’ growth is projected to slightly improve to 5.8 percent.

However, the latest forecasts mark a downgrade from the ADB’s previous projections of 6 percent for 2024 and 6.1 percent for 2025, citing external pressures weighing on regional economies.

The Philippine economy grew by 5.4 percent in the first quarter of 2025. According to the ADB, domestic demand grew by 6.7 percent, supported by easing inflation and a more accommodative monetary policy, although net exports weighed down overall growth as imports outpaced exports.

The ADB noted a slight improvement in the country’s manufacturing sector, with the Purchasing Managers’ Index rising to 50.7 in June from 50.1 in May.

“Consumer sentiment was positive in the near term. Unemployment was low at 3.9 percent in May, and remittance growth of 3.0 percent helped sustain household spending,” the ADB said.

It added, however, that business confidence has softened due to heightened global policy uncertainties.

The ADB said economic forecasts for most Southeast Asian countries were downgraded due to the continuing global slowdown and rising trade uncertainty.

“Weaker external conditions have hurt business and consumer sentiment and threaten to disrupt investment in the subregion,” it said.

“Except for Indonesia, the largest economy in the subregion, all Southeast Asian economies are expected to post weaker growth in the next two years.”

The ADB also lowered its 2025 inflation forecast for the Philippines to 2.2 percent from the previous estimate of 3 percent. For 2026, inflation is expected to settle at 3 percent. (PNA)