January 16, 2025 | 12:00am
MANILA, Philippines — The Philippine economy is projected to grow by 6.1 percent this year, supported by household spending as well as public investment, according to Moody’s Ratings.
In its 2025 Outlook for Sovereigns – Asia Pacific (APAC), Moody’s Ratings said the Philippines would expand by an above-trend 6.1 percent, down from 6.2 percent.
“Rising employment and higher remittance inflows will support household spending. Public investment will also buttress growth, while reforms, including market liberalization and foreign investment will spur private-sector investment,” Moody’s Ratings said.
Last August, Moody’s Investors Service affirmed its Baa2 rating – a notch above minimum investment grade – and stable outlook for the Philippines.
Moody’s Ratings said it expects growth in the APAC to be steady overall in 2025, driven by slower, but still solid, expansion in China and India, robust gains in Southeast Asia and a return to trend growth in Australia.
“We project the 25 rated APAC sovereigns to grow 3.8 percent in 2025 in real terms compared with four percent in 2024 – without factoring in proposed changes in US trade policy,” Moody’s Ratings said.
It added that growth would be stronger in APAC than in most other regions.
“But at the individual economy level, the picture will be more diverse, reflecting variation in domestic demand and exposure to external factors such as the semiconductor cycle,” Moody’s Ratings said.
According to Moody’s Ratings, a major uncertainty for the region stems from the policy pledges of US president-elect Donald Trump.
“Notwithstanding any mitigating measures, China would experience a material hit to output, and growth could also slow significantly in a number of other highly open economies in APAC, if Trump delivered on his pledge to impose tariffs of 60 percent on Chinese imports and a 10 percent to 20 percent universal baseline tariff on most imports from the rest of the world,” Moody’s Ratings said, adding that China’s GDP could be 0.9 percent to 2.5 percent lower in 2025 under such a scenario.
Meanwhile, Moody’s Ratings also noted that spikes in inflation from supply chain constraints and food and energy price surges have faded in most APAC economies.
“We expect monetary policy to ease in most APAC economies in 2025. But where there has been less fiscal consolidation, rate cuts will be limited and debt servicing costs will remain elevated,” Moody’s Ratings said.
The report also said that for APAC sovereigns overall, general government debt would change only modestly in 2025, although debt would remain above pre-pandemic levels for 76 percent.
It added that affordability is weak in some emerging markets (EMs) including India, most FMs and some commodity-exporting economies including Malaysia and Indonesia (Baa2 stable).
“In the Philippines, debt affordability will deteriorate through 2025 as general government interest payments rise to around 13.5 percent of general government revenue because of higher interest rates than pre-pandemic, despite revenue mobilization measures,” Moody’s Ratings said.
Moreover, Moody’s Ratings said that politics and social unrest pose significant economic and fiscal risks in APAC.
“After elections in key economies, governments may need to make choices whether to fulfill pledges or to focus on fiscal consolidation. Financial constraints may limit the ability to address underlying social strains,” Moody’s Ratings said.
It emphasized that many countries in APAC, especially EMs, also have high exposure to physical climate risks, which can add to fiscal strains through spending to repair damage from climate events and to compensate businesses and households.
Moody’s Ratings said the Philippines also has high credit exposure to physical climate risks.
“It frequently experiences typhoons, causing widespread damage and necessitating emergency funds for recovery. This is signaled by its physical climate risks category score of four,” Moody’s Ratings said.
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