Philippines Forecast: Governance Reforms, Steady Growth and Investor-Friendly Policies
WHAT YOU NEED TO KNOW
- In his fourth state of the nation address in July, President Ferdinand Marcos Jr. highlighted his administration’s accomplishments and priorities for the remainder of his term. To address corruption in flood-control projects, he ordered the Department of Public Works and Highways to audit projects to ensure proper use of public funds.
- In Congress, Sen. Vicente “Tito” Sotto III and Rep. Faustino “Bojie” Dy were elected as Senate president and House speaker, respectively, amid investigations on corruption in flood-control projects. Later, Executive Secretary Lucas Bersamin and Budget and Management Secretary Amenah Pangandaman resigned. Department of Budget and Management Undersecretary Rolando Toledo was appointed acting secretary, and Finance Secretary Ralph Recto became executive secretary. Frederick Go, special assistant to the president for investment and economic affairs, took over the Department of Finance, and his office was dissolved.
- The proposed PHP 6.8 trillion ($115.4 billion) national budget for 2026 is currently under deliberation by the bicameral committee, with final approval by Marcos expected before the end of the year.
ON THE HORIZON
- The Philippines will chair the Association of Southeast Asian Nations (ASEAN) in 2026. Marcos said his country will focus on practical, inclusive and measurable initiatives benefiting Southeast Asians while urging unity and cooperation amid global uncertainty to sustain regional peace and progress.
- The first Bangsamoro parliamentary elections in Mindanao, originally scheduled for October, were postponed until the first quarter of 2026. Malacañang reaffirmed its commitment to upholding the peace process, strengthening democratic institutions and protecting the political rights of Bangsamoro citizens. The postponement is significant as it supports the stability of the Bangsamoro peace process and long-term national development.
- The 19 percent U.S. tariff on Philippine exports poses challenges, especially as some regional peers face lower rates. Officials of the Philippine Department of Trade and Industry aim to conclude tariff negotiations with the United States in 2026.
- The first half of 2026 will be crucial in determining whether Marcos’ governance reforms will gain traction in the legislature. These reforms are central to the administration’s efforts to strengthen democratic institutions and uphold good governance.
Philippines Market Overview and Forecast
Political Climate
Anti-Corruption Measures Poised To Gain Momentum
The Philippines has recently taken significant steps to tackle corruption following President Marcos’ July state of the nation address highlighting irregularities in flood-control projects. A key initiative is the creation of the Independent Commission for Infrastructure to investigate anomalies. These include “ghost projects” and substandard infrastructure, with measures such as blacklisting errant contractors and requesting courtesy resignations from senior officials in the Department of Public Works and Highways. Lifestyle checks on government personnel, starting with the department, also aim to uncover unexplained wealth, while digital platforms allow citizens to report irregularities, in turn promoting accountability and public participation in governance.
Digitalization has become a cornerstone of the country’s anti-corruption strategy. The government is leveraging technology to streamline processes, reduce bureaucratic inefficiencies and minimize opportunities for graft. The Civil Service Commission also introduced the New Omnibus Rules on the Statement of Assets, Liabilities and Net Worth to enhance integrity and transparency in the government. The new rules require digital filing and submission, making the process more efficient and accessible for government personnel.
Looking ahead, policy priorities are likely to focus more on strengthening good governance, with technology, transparency and citizen engagement playing key roles in sustaining long-term reforms.
Legislative Priorities for the New 20th Congress
During the Legislative-Executive Development Advisory Council meeting in September, Marcos and congressional leaders identified 44 priority bills under the 20th Congress’ Common Legislative Agenda. These legislative priorities aim to improve the investment climate, modernize governance, support farmers and fishers, expand social services and ensure energy security.
These measures include the amendments to the Bank Deposits and Anti-Money Laundering Laws; amendments to the National Building Code; the Department of Water Resources Bill; the Waste-to-Energy Bill; amendments to the Electric Power Industry Reform Act and the Biofuels Act; the Excise Tax on Single-Use Plastics; the Blue Economy Act; the Progressive Budgeting for Better and Modernized Governance Act; the Right to Information Act; amendments to the Universal Health Care Act; the Digital Payments Act; the Masterplan for Infrastructure and National Development; the Law on Online Gambling; and the Fair Use of Social Media, Artificial Intelligence and Internet Technology in Elections.
These priorities are expected to drive legislative focus in both chambers until the end of the 20th Congress in 2028. Their passage into law is expected to shape the country’s policy landscape, promote economic growth and advance social and environmental development over the coming years. Marcos has directed Congress to prioritize four key measures aimed at enhancing governance and accountability in the Philippines. These include the Anti-Dynasty Bill, which seeks to address political dynasties; the Independent People’s Commission Bill, aimed at promoting transparency and oversight; the Party-List System Reform Bill, which focuses on improving representation; and the Citizens Access and Disclosure of Expenditures for National Accountability Bill, designed to ensure public access to government spending information. These measures reflect the administration’s commitment to strengthening democratic institutions and fostering good governance.
Macroeconomic Climate
Economic Growth Amid Trade Challenges
The Philippine Statistics Authority estimates that the Philippine economy grew 4 percent in the third quarter, down from 5.5 percent in the previous quarter. Key drivers of growth included wholesale and retail trade, the repair of motor vehicles and motorcycles, financial and insurance activities and professional and business services. All major sectors posted gains: agriculture, forestry and fishing (2.8 percent); industry (0.7 percent); and services (5.5 percent). On the demand side, household consumption rose 4.1 percent, with increases in government consumption (5.8 percent), exports (7 percent) and imports (2.6 percent). Gross capital formation recorded a decline of 2.8 percent.
According to the Development Budget Coordination Committee, the Philippine economy is projected to grow 5.5-6.5 percent in 2025 and 6-7 percent from 2026-2028. The Asian Development Bank expects growth of 5.6 percent in 2025, rising slightly to 5.7 percent in 2026 despite global challenges.
The 19 percent U.S. tariff on Philippine imports presents challenges for export sectors, though negotiations are ongoing. While exports and private investment may face headwinds, the Philippines has opportunities to diversify trade, strengthen ties with other partners like the European Union and develop local industries to enhance supply chain resilience.
Investment Environment
Foreign Investment Outlook
Data from the Bangko Sentral ng Pilipinas show that net foreign direct investment inflows totaled $5.5 billion from January-September 2025, down from $7.1 billion in the same period in 2024. Most equity investments came from Japan, the United States and Singapore and were concentrated in manufacturing, wholesale and retail trade and real estate.
Approved foreign investments that have yet to be realized fell by 48.7 percent to PHP 73.7 billion ($1.3 billion) in the third quarter, led by Singapore (27.5 percent). This was followed by Japan (18.4 percent) and the Cayman Islands (17.8 percent). The manufacturing sector had the largest share at 49 percent, followed by electricity, gas, steam and air conditioning supply and real estate activities.
With the signing of Republic Act No. 12252 in September, foreign investors can lease land in the Philippines for up to 99 years, an extension of the previous 50-year limit, with shorter leases for national security and public interest uses. The implementing rules and regulations are expected to be released within 90 days after the law takes effect. This measure is expected to boost investor confidence and attract long-term investments, especially in infrastructure- and land-intensive sectors.
The Board of Investments is finalizing the Strategic Investment Priority Plan for 2025-2028, which will rationalize priority sectors and the tiering of fiscal incentives. Approval is expected in the fourth quarter of 2025.
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
