The Philippine economy demonstrated remarkable resilience, achieving a 5.5% year-over-year GDP growth in the second quarter of 2025. This expansion surpassed the median estimate of 5.4% and was primarily driven by robust domestic consumption. Concurrently, inflation in July 2025 decreased to a near six-year low of 0.9%, significantly below the forecasted 1.1% and down from 1.4% in June. This disinflationary trend is attributed to a notable reduction in utility costs and a substantial 15.9% drop in rice prices.
The nation's economic performance is particularly noteworthy given the imposition of a 19% tariff on Philippine exports by the United States. While this move initially raised concerns about the export sector, economists widely believe the direct impact on overall GDP will be minimal due to the Philippines' strong reliance on domestic demand, which acts as a buffer against external trade shocks. The country's export dependency ratio is relatively low, estimated at 17.3% of GDP, and it maintains diversified trade partnerships beyond the US. In response to the US tariffs, the Philippine government, led by Special Assistant to the President for Investment and Economic Affairs Secretary Frederick Go, has proactively engaged in discussions with the U.S. Trade Representative to identify solutions and mitigate potential effects. The Philippines has secured a 1% reduction in the tariff rate without making significant economic concessions, a move seen as a strategic diplomatic achievement. Further bolstering the economy is the consistent flow of remittances from Overseas Filipino Workers (OFWs), which surged by 4% year-on-year in Q2 2025, reaching $2.66 billion in April alone. This influx of foreign exchange strengthens household purchasing power and further fuels domestic consumption. The Bangko Sentral ng Pilipinas (BSP) has also supported economic activity by cutting interest rates, making borrowing more accessible and encouraging consumer lending. The average inflation for the first seven months of 2025 stood at 1.7%, well within the central bank's target range of 2.0% to 4.0%, indicating a stable price environment conducive to further economic expansion.