WHAT YOU NEED TO KNOW
  • Since the congressional elections in May, President Ferdinand “Bongbong” Marcos Jr. called for the courtesy resignation of all Cabinet secretaries and heads of offices under the Office of the President. While the Cabinet secretaries who are part of the government’s economic team were retained, other secretaries were reshuffled as part of a broader effort to assess department performance and realign with the administration’s updated priorities. The reshuffle is ongoing.
  • Former President Rodrigo Duterte, father of current Vice President Sara Duterte, was arrested in March under an International Criminal Court (ICC) warrant for alleged crimes against humanity tied to his “war on drugs.” He is the first Philippine ex-head of state to be detained by an international tribunal.
  • Vice President Duterte was impeached by the House of Representatives in February over allegations of betraying the public trust; violating the Constitution; and partaking in graft, corruption and other high crimes, becoming the first Philippine vice president to be impeached. She will remain in office until the Senate’s final verdict.
ON THE HORIZON
  • Marcos is set to deliver his fourth state of the nation address in July. He is expected to highlight his administration’s achievements and outline its plans and priorities for the remaining years of his term.
  • Following the midterm elections, the first regular session of the 20th Congress — comprising newly elected senators and congressmen — is expected to open on the day of the state of the nation address, with new committee chairpersons to be announced in the following weeks.
  • Congress is expected to begin its deliberations on the national budget for 2026 in the second half of 2025. According to the national government’s fiscal program, the proposed budget is projected at PHP 6.8 trillion ($121 billion), more than 7 percent higher than the approved PHP 6.3 trillion ($112.6 billion) for 2025.
  • Vice President Duterte’s actual impeachment trial in the Philippine Senate is set for July 30, but the date may change depending on pre-trial developments. The hearing on the confirmation of charges against her father at the ICC is scheduled for September 23.

Philippines Market Overview and Forecast


Political Climate
Midterm Election Outcomes

The Philippines held its midterm elections May 12 for half of the 24-member Senate, the entire 317-member House of Representatives and thousands of local government officials. Based on results released by the Commission on Elections, five candidates from the Marcos administration slate are among the 12 leading senatorial candidates. Four are from the Duterte camp, and one is affiliated with both camps. Notably, two candidates associated with the Liberal Party and the Aquino administration are among the frontrunners. In the House of Representatives, the ruling party led by Speaker Martin Romualdez is expected to retain its dominance.

The elections are seen as pivotal for Marcos as he seeks to consolidate political support and advance his administration’s strategic priorities. Securing a congressional majority would enable the government to advance key initiatives, such as asserting Philippine claims in the South China Sea and strengthening ties with long-standing allies like the United States and Japan. Legislative backing is essential to prevent gridlock, improve the country’s military preparedness, strengthen strategic partnerships and maintain political stability amid geopolitical tensions.

Amid the Marcos-Duterte feud, a stronger presence of administration allies in the Senate could increase the likelihood of pursuing impeachment proceedings against Vice President Duterte, potentially disqualifying her from running for president in 2028. However, election results indicate a tie, making the outcome uncertain. Although her actual impeachment trial is set for July 30, the timeline is uncertain. The Senate postponed pretrial activities to pass priority legislation before the end of the 19th Congress.

Cabinet Reshuffle

Government operations will remain uninterrupted following the reshuffle in the executive branch after the elections. Officials who submitted courtesy resignations will stay in their posts unless the president accepts their resignations. Leadership changes may signal shifts in policy direction in the coming months, which reflect evolving priorities and a recalibration of key programs.

Legislative Priorities

The executive and legislative branches are expected to craft a new list for the 20th Congress that will identify which measures to prioritize. It will likely build on the key agenda items from the 19th Congress. Notably, bills that are not passed in the current Congress, no matter how advanced they are in the legislative process, will need to be refiled for consideration in the new legislative cycle.

Macroeconomic Climate
Moderate Growth Despite External Pressures

The Philippine Statistics Authority reported that the country’s GDP grew 5.4 percent in the first quarter. This was primarily driven by wholesale and retail trade and the repair of motor vehicles and motorcycles (6.4 percent), financial and insurance activities (7.2 percent) and manufacturing (4.1 percent). These key sectors are expected to continue supporting economic growth in the succeeding quarters.

The World Bank has lowered its 2025 growth forecast for the Philippines to 5.3 percent from 6.1 percent, citing global trade uncertainties driven by tariffs. This is below the government’s 6-8 percent target. Slowdowns in the United States and China are also expected to weaken external demand.

The U.S. imposition of a 17 percent tariff on Philippine imports presents challenges for export sectors. Although it may slow demand, it also opens opportunities for the Philippines to attract trade and investment by promoting itself as a lower-tariff alternative. U.S. tariffs on Philippine imports are considerably lower than those on imports from other countries. Expanding ties with the European Union and strengthening local industries may help offset risks and enhance supply chain resilience.

On inflation, the latest Philippine Statistics Authority data show a continued easing, with the rate falling to 1.4 percent in April from 1.8 percent in March. Although inflation has slowed, it still reflects rising consumer prices. The government maintains its inflation assumption for the year at 2-4 percent.

Investment Environment
Investment Prospects for the Philippines

Foreign direct investment net inflows amounted to $1.3 billion in the first two months of 2025, indicating a 45.2 percent decline year on year. Most equity capital placements originated from Japan, followed by the United States, and Singapore, with investments directed primarily to the manufacturing, finance and insurance and real estate industries.

Foreign investment commitments in the first quarter of 2025 fell 82.0 percent year-on-year to PHP 28 billion ($502.8 million). Korea led these pledges, accounting for 44.2 percent of the total, followed by the United States and China. The real estate sector had the largest share of foreign investment pledges, accounting for 38.5 percent of total commitments.

In 2024, total investment pledges from both foreign and local investors rose 32.7 percent to PHP 2 trillion ($34.8 billion), indicating sustained investor interest.

Several recent policy developments are expected to support investment growth in the second half of the year. The Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act, enacted in late 2024, now has implementing rules and regulations that ensure that previously registered business enterprises retain their tax incentives while also accessing new benefits under the newly enacted law. The rules authorize the Fiscal Incentives Review Board to assess the impact of incentives on high-value projects. Moreover, the Department of Trade and Industry is set to release the Strategic Investment Priority Plan for 2025-2028 by midyear, which will identify priority sectors eligible for incentives.

The investment momentum will likely strengthen in the second half of the year as political and economic uncertainties ease after the midterm elections and as new policy reforms take effect. Given Washington’s relatively higher tariffs on several Indo-Pacific economies, the Philippines may benefit as companies seek alternative supply chain bases.

We will continue to keep you updated on developments in the Philippines as they occur. If you have any questions or comments, please contact BGA Philippines Managing Director Victor Andres Manhit at vmanhit@bowergroupasia.com.

Best regards,

BGA Philippines Team

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Managing Director

Dindo is recognized as one of Manila’s most well-connected and savvy advisors on developments in government and business in the Philippines. Concurrent to his role as managing director for BGA’s operations in the Philippines, he is also the founder and managing director of the Stratbase Group and president of its policy think tank, the Albert del Rosario Institute for Strategic and International Studies. Since 1991, Dindo has served as a member of the faculty and is the former chair of the Political Science Department and a senior fellow of the La Salle Institute of Governance at the De La Salle ... Read More