Economists are optimistic the Philippine economy will grow by more than 6% this year, fuelled by election-related spending and declining inflation, despite challenges posed by the ongoing trade war between the US and its trading partners.

According to Angelo Taningco, Vice President, Research Head, and Chief Economist of the Financial Markets Segment at Security Bank Corp., historically, election years often contribute to accelerated GDP growth.

“Our own estimate is close to the lower bound of the target at around 6.1% for this year. If the magnitude of say election spending is stronger than anticipated, thanks to low inflation, thanks to rate cuts, etc., then we could see a higher upside on the GDP growth this year compared to last year,” he said during a session organised by the Philippine Institute for Development Studies (PIDS).

Taningco explained that on the demand side, household consumption tends to perform significantly better during election years, while overall trade improves and capital formation strengthens as businesses increase capital expenditures, SunStar reports.

However, he cautioned that as a net importing country, the Philippines must closely monitor the macroeconomic and inter-sectoral impacts of the ongoing global trade war.

“Within the Philippines, I would surmise that electronics, automobiles, transport equipment and the like –those widely tradeable products of the Philippines– will be adversely affected by a global trade war,” he said.

Robert Dan Roces, an economist at SM Investments Corp., emphasised that tariffs and the ongoing trade war are the primary challenges the country must navigate.

“We are a very import-dependent country. We import oil, now we are importing most of our foodstuff, so any external shock definitely affects us,” he said.

Furthermore, Dr John Paolo Rivera, Senior Research Fellow at PIDS, stated that achieving a GDP growth of at least 6.1% this year is “always possible” as long as the appropriate policy interventions are put in place, despite the existing challenges.

“That’s why I agree that the Philippines should always diversify its economic activities with its trading partners, would also strengthen internal economic constraints in the Philippines and hitting the 6 to 8% (growth) target would always require stronger momentum, particularly in key sectors and improved domestic and global conditions,” he said.

“(These are) key sectors where the Philippines has a comparative advantage. Resources can be focused on these sectors that can generate greater multiplier effects for the economy,” he added.

Moreover, Rivera noted that monetary easing through public spending and improved global conditions could help foster a more positive growth outlook for 2025 and beyond.

In 2024, the Philippine economy grew by 5.6%, with services and industry serving as the principal drivers of this growth.