PHILIPPINE economic growth is expected to remain within target this year, although global trade woes and domestic political uncertainty may cloud the outlook, Fitch Ratings said.

“We expect the Philippines’ economy to expand by 5.6% in 2025, broadly in line with 2023-2024, fueled by the traditional growth drivers of large public infrastructure investments, services exports and remittance-funded private consumption,” Fitch Ratings said in a peer credit analysis released Monday.

The credit rater maintained its Philippine gross domestic product (GDP) projection at 5.6% for this year, within the government’s 5.5-6.5% target.

“Private demand should be supported by easing inflation and interest rates,” Fitch added.

Headline inflation picked up to 1.7% in September, faster than the 1.5% in August but slower than the 1.9% clip a year ago. This brought the year-to-date inflation to 1.7%, matching the Bangko Sentral ng Pilipinas’ (BSP) full-year forecast.

Earlier this month, the BSP trimmed its key policy rate by 25 basis points (bps) to a three-year low of 4.75%. It has so far reduced borrowing costs by a total of 175 bps since August last year. 

“However, domestic political uncertainty could affect investment, with allies of President Ferdinand Marcos doing worse than we expected in the recent midterm elections and a recent corruption scandal,” Fitch said.

Recently, several Public Works officials, private contractors and lawmakers have been linked to multibillion-peso corruption involving government flood control projects.

“Global trade tensions will likely drag on growth, in particular indirectly through weaker global demand,” Fitch added.

At the same time, Fitch Ratings said its “BBB” rating and “stable” outlook for the Philippines, which it last affirmed in April, reflects the country’s strong medium-term growth prospects.

“The ‘BBB’ rating and ‘stable’ outlook reflect the Philippines’ strong medium-term growth, which supports a gradual reduction in government debt/GDP, and the large size of the economy relative to ‘BBB’ peers,” it said. “The rating is constrained by low GDP per head, despite an upward trend.”

In the first half, the Philippine economy grew by an average 5.4%, slower than 6.2% seen in the same period last year.

For his part, Department of Budget and Management (DBM) Undersecretary and Principal Economist Joselito R. Basilio said third-quarter GDP will likely remain within target, driven by private consumption.

“(The GDP is) most likely on target,” he told reporters on the sidelines of the 2025 Fiscal Policy Conference on Monday. “The target range is low, right? So, it can be reached very easily,” he added referring to the 5.5-6.5% government target.

The third-quarter GDP data will be released on Nov. 7.

Mr. Basilio said that private consumption might have picked up in the third quarter amid easing inflation and interest rates.

“So, maaasahan natin ngayon ’yung private sector driven growth (So, we can now rely on private sector-driven growth),” he added.

Mr. Basilio said he expects GDP growth to remain on target until yearend as the government plans to boost its spending in the coming months.

The Development Budget Coordination Committee is scheduled to meet between late November to early December to review its macroeconomic targets, he added.

‘CORRUPTION KILLS GROWTH’
Meanwhile, GlobalSource Partners’ analysts said massive corruption in flood control projects have weighed on Philippine economy, preventing it from growing over 6%.

“These funds — siphoned through fraudulent contracts and padded budgets — could have built schools, improved hospitals, and created up to 266,000 jobs. The resulting drag on productivity meant economic growth of 5.5-5.7%, when the economy could have expanded closer to over 6%,” GlobalSource country analysts Diwa C. Guinigundo and Wilhelmina C. Mañalac said in an Oct. 23 commentary.

Finance Secretary Ralph G. Recto earlier said the economy may have lost up to P118.5 billion between 2023 and 2025 due to these anomalous projects.

“The moral indictment is clear: corruption kills growth, weakens resilience, and erodes trust. When infrastructure becomes a source of private enrichment rather than public service, the entire development agenda collapses,” they added.

For a developing country like the Philippines, they said good governance is an “economic necessity,” not a “moral luxury.”

“Every peso lost to corruption is a peso withheld from productive investment. When public works are marred by inefficiency and fraud, they not only waste resources but also weaken the very foundations of inclusive growth: connectivity, productivity, and resilience,” they said.

“Unmasking corruption in public works, therefore, is more than an anti-graft exercise — it is a strategy for resilience and growth. In the final analysis, the most enduring infrastructure a nation can build is good governance itself: a system sturdy enough to withstand both earthquakes and temptations.” — Katherine K. Chan

By Katherine K. Chan

STRICTER visa and immigration policies in the United States could slow demand for Filipino workers and potentially dampen remittance inflows, analysts said.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said a weakening US labor market has started to affect remittances from US-based migrant Filipino workers.

“We’re arguably already starting to see the softening in the US job market impact remittances from Filipinos there,” Mr. Chanco told BusinessWorld in an e-mail.   

He noted that the growth in remittances from US-based Filipinos has slowed to 0.5% in August, “a far cry from its previous peak of 4.2% in the middle of last year.”

“This ongoing slowdown certainly poses a downside risk to the BSP’s (Bangko Sentral ng Pilipinas) 3% growth assumption for remittances,” he added.

In August, cash remittances grew by 3.2% to $2.977 billion from $2.885 billion a year ago. 

This brought the cumulative cash remittances in the January-to-August period to $22.909 billion, 3.1% higher than the $22.217 billion seen in the same period last year. The bulk or 40.4% of the remittances came from US-based Filipino workers.

The BSP projects cash remittances to increase by 3% to $35.5 billion this year.

Since assuming office in late January, US President Donald J. Trump has tightened border enforcement, ordered a crackdown on illegal immigration and has moved to limit foreign workers.

“Such policies tend to make OFWs more cautious, possibly reducing remittance amounts or sending frequency,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message. 

“Given that the US is a major source of Philippine remittances, these developments could make it harder to hit the BSP’s 3% growth target for remittances,” he added.

VISA ISSUE
Meanwhile, the International Monetary Fund (IMF) said the US government’s move to impose a $100,000 fee on new H-1B visas may pose a risk to remittances from the US.

“The fee on H-1B visas could impact remittances from the US, but we do not have specific estimates at this point,” an IMF spokesperson told BusinessWorld in an e-mail, adding that they will monitor further developments and evaluate its impact once additional information becomes available.

In September, Mr. Trump issued a proclamation that required employers who are sponsoring foreign-born workers through the H-1B work visa to pay a one-time fee of $100,000 fee to the US government.

H-1B visas allow foreign workers to temporarily work for US companies in industries such as science, information technology, engineering and finance. The fees are typically shouldered by employers. 

Angelo B. Taningco, research head and chief economist at Security Bank, said stricter US immigration and visa policies may have a moderate to minimal effect on overseas Filipino workers (OFWs) remittances.

“I think OF remittance flows from US to the Philippines would be moderately impacted by restrictive US immigration policy, but minimally affected by the hefty $100k H-1B visa fee because there are not many Filipino H-1B visa applicants,” he told BusinessWorld in an e-mail.

Workers from India account for the majority or about 70% of the total H-1B visa approvals.

On the other hand, Filipinos hold less than 1% of the total number of H-1B visas, according to IT & Business Process Association of the Philippines President and CEO Jonathan R. Madrid.

Nonetheless, Mr. Rivera said the new visa fee could reduce future remittance inflows by discouraging new applicants.

“The new $100,000 fee on new H-1B visa petitions raises the cost of working legally in the US, which could discourage new entrants or slow the growth of that skilled migrant stock, thus dampening future remittance volumes,” he said.

Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., noted that lower remittances could hit the economy as it might limit household spending.

“Lower remittances may show lower disposable income of families with OFWs, thus lower disposable income may result in lower spending,” he said in a Viber message. “Lower spending results in slower jobs and income growth within the domestic economy.”

Mr. Rivera also said weaker inflows could also put a strain on foreign exchange reserves as well as put more pressure on the peso and external balance.

“The Filipino diaspora in the US is still the largest globally — by far — so I highly doubt that making it difficult for new entrants to come into the country in the future will instantly affect the US’ position as the largest origin market for remittance inflows,” Mr. Chanco said.

“For now, with total remittance growth holding fairly steady at 3%, these aforementioned developments in the US shouldn’t have a significant bearing on the Philippines growth prospects,” Mr. Chanco added.