First of two parts
IN BRIEF:
• The Philippine economic outlook for 2025 remains promising despite global uncertainties.
• Philippine CEOs are cautiously optimistic on the local business outlook but have expressed higher confidence in their own sector, recognizing that local challenges tend to have more direct and immediate impact on their businesses compared to global issues.
• With balanced optimism, Philippine CEOs are prioritizing strategic initiatives in two key areas: investing in new opportunities through M&A and partnerships and accelerating technology adoption.
As global uncertainties persist in 2025, corporate leaders are faced with the challenge of navigating the growing complexity of the business environment. It is essential for them to lead their companies through strategic actions toward a well-defined vision for the future, which is why EY-Parthenon conducted the EY CEO Outlook Pulse survey, which gathered insights from 1,200 CEOs globally, including Philippine respondents.
The survey explores the ongoing transformations within organizations, driven by executive leadership. In the Philippine edition of the survey, SGV zooms in on the unique perspective provided by CEOs on their expectations for future growth and long-term value creation in light of the uncertainties and the country’s current economic conditions.
PHILIPPINE ECONOMIC GROWTH
In 2024, the Philippine economy experienced growth of 5.6%, up from 5.5% the previous year, making it the second fastest-growing economy in Southeast Asia, following Vietnam at 7.1%. The strength of the economy was characterized by robust domestic consumption, which recorded full-year growth of 4.8%, despite some moderation observed in the fourth quarter. Economic expansion was primarily driven by growth in the industry and services sectors, which offset the decline in agricultural output due to adverse weather conditions.
Several factors contributed to economic growth in 2024, including a more favorable domestic environment and supportive government policies. Throughout the year, strong household spending was maintained, benefiting from lower inflation. The deceleration in prices resulted from a combination of government measures, such as the reduction of rice tariffs, and a general easing of price pressures following a spike in the previous period. Government spending also increased, with a larger infrastructure budget allocated to expedite the Build Better More (BBM) program of the current administration. Additionally, a more supportive financial environment emerged as the central bank adopted a less restrictive monetary policy, encouraging greater private investment.
The economy demonstrated resilience in the face of global economic headwinds in 2024, including slower global growth, geopolitical tensions, and uncertainty stemming from elections in various major countries. A key factor in this stability was sustained domestic consumption, which helped insulate the country from the full impact of external shocks compared to other regional economies.
The growth outlook for the country in 2025 remains promising, with international organizations and financial institutions projecting an economic expansion of approximately 6.1%. This trajectory positions the nation to potentially achieve upper-middle-income status by the end of the year. To realize the Philippine economic growth forecasts, a delicate balance must be maintained between sustaining strong consumer spending and implementing policy reforms that enhance investor confidence.
With a favorable demographic profile, stable inflation, and steady remittances from overseas Filipino workers (OFWs), household consumption is poised for further growth. This is bolstered by an expanding workforce and rising disposable incomes. Additionally, the Bangko Sentral ng Pilipinas (BSP)’s ongoing policy of low interest rates and reduced reserve requirements for banks is expected to facilitate economic growth by increasing credit availability. Inflation in 2025 is anticipated to stabilize at 3%, following a peak of 6% in 2023 and interest rate cuts that began in August 2024.
Despite potential shocks from the global market, the country is expected to maintain a conducive environment for economic activity. While the overall outlook for the Philippines remains positive, the strong interconnection between the global economy and the domestic economy presents both opportunities and threats, as external events could impact local businesses across various sectors. Rising tensions in oil-exporting countries and policy shifts in major economies like the US could lead to increased import and commodity costs, raising operational expenses for local businesses. These global disruptions also underscore the fragility of supply chains, which may result in higher production costs. Moreover, shifts in the global economy could create new trade barriers, affecting the export competitiveness of Southeast Asian countries.
In addition to global risks, local conditions such as political uncertainty and infrastructure deficiencies pose significant challenges to the Philippine economy, contributing to a less predictable business environment. Consequently, domestic economic growth will depend on the country’s ability to seize opportunities while protecting itself from emerging threats both within and beyond its borders.
BALANCING CAUTIOUS OPTIMISM AND STRATEGY
Philippine CEOs must strike a balance between optimism and strategy when making decisions. The confidence of CEOs significantly influences their annual agendas, highlighting the importance of assessing the outlook of Philippine CEOs for the upcoming year. The survey indicates that 62% of Philippine CEOs maintain a slightly optimistic view of the business environment, while expressing higher confidence from a global (46%) and sector-specific (48%) perspective.
Philippine CEOs are confident, but not excessively so, in their near-term outlook. They are cautiously optimistic about domestic growth, recognizing that local challenges tend to have a more direct and immediate impact on their businesses compared to global issues. This perspective reflects a conservative view that global headwinds may pose greater risks to local enterprises than to their counterparts in more mature economies, particularly given the Philippine economy’s reliance on imported key commodities and revenue streams linked to external markets, such as the BPO sector and remittances from OFWs.
Unsurprisingly, Philippine CEOs express the most confidence in growth within their own sectors. This confidence is largely attributed to their expertise, characterized by deep insights into industry trends, competition, and market opportunities. Industry-level confidence is further bolstered by continuous growth in the digital economy, which expanded by 11% in 2023 compared to 2021. This growth has particularly benefited the technology and digital services industries, which are experiencing a sustained upward trend due to increased demand for digital services and improvements in the country’s digital infrastructure. Similarly, the financial services sector has gained from the expansion of digital infrastructure, rising demand for diverse financial products, and higher digital adoption, resulting in a 36.3% growth rate in the total assets of the Philippine banking system in 2024.
Given their balanced optimism, Philippine CEOs recognize the need for proactive measures, driving strategic initiatives in two key areas: investing in new opportunities — such as joint ventures and mergers and acquisitions (M&A) — and accelerating technology adoption. A notable 86% of respondents prioritized investments aimed at enhancing operational efficiency and growth through joint ventures or M&A, while 82% are focused on maximizing their companies’ existing technology stacks through further investment.
The 2025 outlook of Philippine business leaders underscores a technology-forward approach, with 80% of CEOs emphasizing the importance of investing in emerging technologies. This focus is evident in recent strategic moves, such as a major fintech company’s partnership with a leading Japanese financial group to strengthen its digital payments platform, and a global business services provider’s acquisition of a customer experience firm to enhance artificial intelligence (AI) and automation capabilities. Overall, this trend reflects a growing recognition of the value of collaboration and innovation through acquisitions to drive growth and improve service delivery.
Survey results indicate a more cautious outlook on costs, with a net optimism score of 62% regarding input costs and just 40% concerning the ability to pass cost increases onto customers. While CEOs expect inflation to align with forecasts, they acknowledge potential risks that could disrupt this trajectory. Consequently, a key concern is the ability to transfer costs to customers if input prices rise more than anticipated. To mitigate these risks, Philippine CEOs are planning to adopt strategies that enhance their operational capabilities through strategic initiatives like M&A and joint ventures to unlock efficiencies and potential cost synergies.
In the second part of this article, we discuss transforming operations to accelerate business advancement and using mergers and acquisitions as a catalyst for growth and transformation.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Noel P. Rabaja is the strategy and transactions leader of SGV & Co.