Boosting private sector activity and creating more jobs will be crucial for the Philippines to sustain inclu-sive economic growth amid growing global uncertainty and domestic risk, the World Bank said in its lat-est Philippine Economic Update released on Thursday.
The Washington-based agency kept its growth forecasts for the Philippines at 5.3 percent, 5.4 percent, and 5.5 percent for 2025, 2026 and 2027, respectively.
These figures are similar to those released in the Global Economic Prospects report on June 11.
The World Bank said that unlocking the potential of the country’s business sector, particularly that of its small and medium-sized enterprises (SMEs), will help the Philippines maintain its strong growth trajec-tory.
“Boosting private sector growth and job creation can help the Philippines mitigate the impact of global policy uncertainty,” Zafer Mustafaoğlu, Division Director for the Philippines, Malaysia, and Brunei, said.
“This will require improving infrastructure, bridging skills gaps, implementing business-friendly policies, and mobilizing private sector capital, as public funds alone cannot meet the country’s development needs,” he added.
According to the latest report, the government’s commitment to public investment and public-private partnerships is expected to sustain investment growth in the coming years. However, significant chal-lenges remain, the World Bank said.
Despite a recent bounceback in consumer spending, uncertainty in global markets has caused exports and foreign direct investment to decelerate, the multilateral agency said.
In addition, the first quarter of 2025 saw the country’s fiscal deficit widening to 7.3 percent as higher fiscal transfers to local government units, interest expense and capital outlays propelled public spend-ing.
“A growing policy challenge is how to manage fiscal consolidation while maintaining strong growth,” Jaffar Al-Rikabi, World Bank senior country economist for economic policy, said.
“Carefully managing expenditure disbursements will help bring the year-end deficit in line with expecta-tions. Over the medium term, reforms to strengthen domestic revenue mobilization and improve public expenditure efficiency will enable the government to implement its medium-term fiscal framework and rebuild fiscal buffers,” he added.
The Bank report stated that the Philippines can further enhance its growth prospects by implementing vital reforms that empower SMEs to flourish.
SMEs account for 63 percent of the Philippines’ total employment and contribute 36 percent to its gross value added.
By supporting growth of high-potential SMEs, the country can unlock the potential for increased eco-nomic dynamism and resilience, the bank said.
“At present, many SMEs in the Philippines operate at low productivity levels and encounter challenges in scaling up due to limited access to finance. As such, they export less and are less engaged in global value chains than their counterparts in East Asia and the Pacific region,” it said.
The World Bank pointed out that this limits their opportunities to learn and grow through competition, as well as benefit from the spread of technology.
“Regional and global value chains are more than just sales outlets; they are platforms for creating quality jobs and more value-added through benefits from scale, increased competition, and learning,” Jaime Frias, senior economist for the World Bank’s Finance, Competitiveness, and Innovation Global Practice, said.
“Firms that engage with international markets are generally more productive, in part because it takes high productivity to export, but also because exporting makes them more productive,” he added.
The World Bank noted that several constraints exist in developing exports by SMEs and integrating them into regional and global supply chains.
These include restricted access to testing facilities and certification services, limited availability of financ-ing for equipment and quality upgrades, and insufficient market information to facilitate effective match-ing between buyers and sellers.
The report stated that improving access to testing facilities and certification services requires invest-ments to make these services more affordable.
Cited as equally important is the simplification of regulations for laboratories and the importation of testing equipment, coupled with securing international recognition and ensuring the compatibility of Philippine certifications and standards.
“Investing in credit information and collateral registries can help financial institutions better understand the financial burden of SMEs, thereby lowering borrowing costs. This, in turn, makes it easier for SMEs to invest in new equipment and improve the quality of their products,” the World Bank said.
The multilateral agency said the government can enhance firms’ competitiveness by promoting infor-mation sharing, which benefits both SMEs and larger companies.
This involves closing information gaps by providing easy access to export market data and establishing systems to connect small and medium-sized enterprises (SMEs) with larger firms and multinational cor-porations, it added.
