Philippines Economic Update : Powering Progress - Electricity, Competitiveness, and Growth Pathways

Overview & Synopsis

This document examines the country's transition to upper-middle-income status in 2025 following strong economic growth averaging 5.8 percent annually from 2021 to 2025. The report notes that growth has slowed due to weakened investment, policy uncertainty, delays in public infrastructure implementation, and rising energy prices linked to conflict in the Middle East. Elevated inflation, driven largely by energy costs, has reduced household purchasing power and increased poverty risks, particularly among lower-income groups. Economic growth is projected to moderate in 2026 before recovering in 2027 as governance conditions improve and public investment resumes. Key risks include prolonged disruptions to global energy markets, weakening global technology investment, infrastructure constraints, and climate-related shocks. The report highlights the importance of targeted social protection, fiscal sustainability, and governance reforms to support recovery. Its special focus on the power sector emphasizes that high electricity costs, fuel dependence, transmission constraints, and limited market competition undermine competitiveness and resilience. The report concludes that accelerated implementation of power sector reforms, including greater adoption of least-cost renewable energy, expanded transmission capacity, improved market competition, and enhanced system flexibility, could lower electricity costs, strengthen economic competitiveness, create more than 161,000 additional jobs, increase GDP by over 1 percent by 2030, and reduce poverty, making energy reform central to the Philippines’ medium-term growth and development agenda.