Manila: The Philippines is emerging as one of the fastest-growing economies in Southeast Asia this year, as highlighted by an economist from Moody’s Analytics during a recent virtual briefing.

According to Philippines News Agency, economist Sarah Tan emphasized that the robust growth of the Philippine economy is largely driven by its domestic market, particularly private consumption. Tan indicated that Moody’s Analytics anticipates the country’s economic growth to reach 5.9 percent this year, up from 5.6 percent projected for 2024.

Looking ahead, the forecast for next year suggests a growth rate of 5.8 percent. Although this falls short of the government’s target, it represents the strongest expansion in three years. The growth is expected to be sustained by private consumption and investment, underpinned by stable inflation and a relaxing monetary policy.

Inflation is predicted to further decrease, remaining within the government’s target range, with projections of 2.8 percent in 2025 and 3 percent in 2026. Despite the positive outlook, Tan noted the challenges faced by the Bangko Sentral ng Pilipinas (BSP) in balancing price stability with economic growth. She indicated that progress in controlling inflation could support further rate cuts.

However, Tan cautioned that potential US tariff increases and slower global interest rate normalization could impact global demand, prompting the BSP to approach monetary easing carefully to prevent significant peso depreciation. The current forecast suggests a reduction in the policy rate by 50 basis points to 5.25 percent by the end of 2025.

Tan concluded by highlighting that external conditions, particularly potential US tariff hikes and uncertainties in global demand, pose significant challenges to the Philippines’ exporters and industrial producers.