• Delegates from 22 U.S. businesses and nonprofit organizations announced more than $1 billion of completed or anticipated U.S. investments in the Philippines during the U.S. Presidential Trade and Investment Mission to the Philippines led by Secretary of Commerce Gina Raimondo in March. The renewable energy, transportation infrastructure, information and communications technology, cybersecurity and cross-border data management sectors will all benefit from this investment. This mission aimed to strengthen collaboration and enhance economic ties between the two countries.
  • Philippine President Ferdinand Marcos Jr. joined his U.S. and Japanese counterparts in April for an inaugural trilateral summit in Washington, D.C. The three leaders have consistently affirmed their commitment to a rules-based international order, focusing on the South China Sea.
  • Marcos approved the National Cybersecurity Plan 2023-2028 in February. The plan aims to provide the Philippines with a policy direction and operational guidelines to build its cybersecurity capacity and ensure a cyber-safe population.
  • Marcos will deliver his third state of the nation address in July. He is expected to discuss his administration’s accomplishments during his first two years in office and outline his plans and policy direction for the remainder of this term. Legislative priorities will also be announced.
  • The Development Budget Coordination Committee is proposing a national budget of PHP 6.2 trillion ($108.5 billion) for 2025, equivalent to 21.4 percent of the GDP and 7.5 percent more than the previous year’s budget. Government spending will prioritize high-impact public infrastructure projects and essential social services, especially for the poor and vulnerable. The budget will support the administration’s Build Better More Program, maintaining infrastructure spending between 5-6 percent of the GDP from 2024 to 2028.
  • The Philippine Department of Trade and Industry will look to restart formal discussions of a bilateral free trade agreement between the Philippines and the European Union by the third quarter.

Philippines Market Overview and Forecast

Political Climate

Key Changes in Leadership

President Marcos earlier this year appointed former Sen. Ralph Recto as the new finance secretary, succeeding Benjamin Diokno, who now serves as a full-time member of the central bank’s monetary board. Recto’s appointment carries significant implications for the Philippine economy and will shape its policy direction in the years ahead. The new secretary’s priorities include enhancing collection efficiency by expediting implementation of the Ease of Paying Taxes Act, promoting digitalization initiatives in the Internal Revenue and Customs bureaus and strengthening efforts to combat corruption. Despite affirming that no new taxes will be proposed, he has pledged to advance the tax measures endorsed by his predecessor.

The Office of the Special Assistant to the President for Investment and Economic Affairs, headed by businessman Frederick Go, was established under the Office of the President in December 2023 to ensure the effective integration, coordination and implementation of various government investment and economic policies and programs. Go’s appointment could help drive economic growth given his valuable insight into industry dynamics and market trends.

Legislative Priorities

The Legislative-Executive Development Advisory Council met in March to identify important legislation for Congress to pass before Marcos’ third state of the nation address in July. Fourteen bills have been approved by the House of Representatives; the others are being discussed in the Bicameral Conference Committee. The government is fast-tracking measures to boost livelihoods, protect the environment and strengthen national security. The advisory council indicated that all priority measures are expected to be enacted by June. Legislators have also affirmed their commitment to ensure the timely passage of the Marcos administration’s legislative priorities. Notable among these are the CREATE MORE (Maximize Opportunities for Reinvigorating the Economy) Bill, which impacts the provision of incentives and tax refunds for corporations, and the value-added tax on digital transactions bill, which strengthens the government’s authority to impose such taxes and emphasizes the government’s approach toward digital and cross-border transactions. The passage of these measures is expected to provide policy stability and certainty, which in turn protects investors.

Macroeconomic Climate

Economic Growth Continues Apace Despite Inflationary Trend

The Philippine economy expanded 5.5 percent in the fourth quarter. Financial and insurance activities, wholesale and retail trade, repair of motor vehicles and motorcycles and construction were the primary drivers of this growth. The strong fourth-quarter performance brought 2023 GDP growth to 5.5 percent, making the Philippines the fastest-growing economy in Southeast Asia for the year. The country is projected to grow by more than 6 percent in 2024 and 2025, making it one of the fastest-growing economies in Southeast Asia, according to the latest quarterly update of the ASEAN+3 Regional Economic Outlook.

Inflation climbed to 3.7 percent in March due to increased food prices and transportation expenses. This was higher than February’s 3.4 percent but lower than the 7.6 percent recorded in March 2023. The government’s target range for inflation stands at 2-4 percent. Public opinion surveys by Pulse Asia Research Inc. indicate that controlling inflation, increasing pay and creating more jobs are among Filipinos’ top concerns. This sentiment is likely to endure, though the government is expected to continue addressing these issues moving forward.

Investment Environment

Impact of Geopolitical Risks on Investment

Central bank data shows that 2023 net foreign direct investment inflows amounted to $8.9 billion — a contraction of 6.6 percent from the $9.5 billion in net inflows recorded in 2022. Despite the country’s sound macroeconomic fundamentals, concerns about subdued global economic growth and geopolitical risks continue to weigh on investment plans. Notably, the top country sources of foreign direct investment in 2023 were Japan (51 percent of the total), the United States (13 percent), Singapore (12 percent) and Germany (8 percent). Investments were concentrated in the manufacturing sector (53 percent), real estate (13 percent) and financial and insurance activities (10 percent).

The March 11-12 U.S. Presidential Trade and Investment Mission to the Philippines marks a significant advancement in strengthening ties between the United States and the Philippines, with more than $1 billion in investments announced in renewable energy, transportation infrastructure, information and communications technology, cybersecurity and cross-border data management. Separately, the inaugural Philippines-Japan-U.S. trilateral summit presented the Philippines with opportunities to enhance its economic ties with its most valued trade and investment partners.

Policy Developments on the Investment Environment

Secretary Go of the Office of the Special Assistant to the President for Investment and Economic Affairs, which leads the implementation of the green lanes for strategic investments to expedite the permit and license acquisition process, identified five priority sectors for major investments: mining (nickel and copper), semiconductors and microelectronics, agriculture, steel and pharmaceuticals. Investments are likely to be focused on these areas moving forward.

Executive Order No. 59, issued in April, aims to streamline the permitting process for infrastructure flagship projects. In terms of legislation, a key milestone was achieved in March with the finalization of the implementing rules and regulations of the Public-Private Partnership Code, which was passed into law in December 2023. The code and its rules and regulations are seen to enhance and institutionalize public-private partnerships by offering a comprehensive legal framework for all such projects at the national and local levels. This is expected to stimulate much-needed development across a wide range of sectors and expedite the delivery of affordable, accessible and efficient public services in the years to come.

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