Worldbox Business Intelligence Risk Rating – August 2025
THE PHILIPPINES
Summary
NEW – Technology is an increasingly important driver of economic success, and we are now including a separate Technology sector in our quarterly country risk reports and integrating the core into our overall score.
| Overall Risk Score 28/40 (Stable)
Political risk: Stable 8/10 Economic risk: Stable 7/10 Commercial risk: Stable 7/10 Technology risk: Stable 6/10 The risk assessment of a country is made up of four components, being Political, Economic, Commercial and Technological. Each component is scored out of 10 with 1 being the highest risk and 10 the lowest. |
ESG Risk: 7/10 (Stable)*
*Environmental, social and governance (ESG) issues are becoming increasingly important to companies, investors and consumers in Southeast Asia. That is why we are now preparing a separate ESG score and section with our quarterly country risk reports. We explain how each country rates, looking at the E, S and G individually, and outline recent developments. |
Political Risk – Stable at 8
The Philippines Is a multi-party, representative democracy modelled on the US system. This involves a presidential system of government with a bicameral legislature and an independent judiciary. The president is limited to one 6-year term. According to Freedom House:
“Elections are free from overt restrictions. However, established political elites benefit from structural advantages, and highly organized disinformation campaigns and widespread vote buying undermine fair competition. Corruption is endemic, and anticorruption bodies struggle to uphold their mandates. Journalists and activists perceived as critical of the government or other powerful interests can face criminal cases, and in some cases violent and even deadly attack.”
The current president, Ferdinand “Bongbong” Marcos Junior, was elected in a landslide at the May 2022 presidential election. The son of former dictator Ferdinand Marcos, who ruled the country from 1965 to 1986.
Marcos’ approval ratings has fallen sharply recently, dropping from 33% in the fourth quarter of 2024 to just 19% in Q1 2025, with 57% disapproving and 24% remaining neutral. Concerns over corruption and inflation are among the reasons behind the falling ratings.
Another reason for Marcos’ falling ratings is his decision to assist in the arrest of former president, Rodrigo Duterte by the International Criminal Court (ICC) in March. The ICC wishes to try Duterte for his involvement in thousands of extrajudicial killings carried out during anti-drugs campaigns he ordered – after he became president in 2016, but also during his tenure as mayor of the southern city of Davao from 2011.
Marcos has also moved against Sara Duterte, his vice-president and the daughter of former president Duterte. Late last year, the lower house of Congress, which is controlled by Marcos’ loyalists, filed a petition to impeach Ms Duterte. That trial is due to take place in the Senate this year. If she is impeached, under the constitution, she would be barred from holding high political office, weakening the political power of the Dutertes even further.
Marcos and Sara Duterte entered into a marriage of convenience to contest the May 2022 election. In June 2024, Sara Duterte announced her resignation from office, and the once celebrated “UniTeam” came to an end. Marcos’ decision to break with the Dutertes carries risks. The latter enjoy strong popular support in the south, and among the millions of overseas Filipino workers. Duterte has accused the government of surrendering her father to “foreign powers” and of violating Filipino sovereignty.
The mid-term elections held in May provided a litmus test of support for Marcos and Duterte with 82% of the electorate casting their vote. Twelve of the 24 seats in the Senate were up for election and the results would determine whether Duterte would be impeached, given two thirds of senators have to vote in favour. In the event, the outcome proved disappointing for Marcos.
His party won six of the 12 Senate seats but one of the six also accepted endorsement from Duterte, whose camp won a further four Senate seats. Traditionally, one would expect an incumbent president to win the vast majority of the seats suggesting that Marcos’s position is weakening, while Duterte retains considerable support.
Moreover, in July, the Supreme Court, dominated by Duterte supporters, ruled out any impeachment trial against Duterte in 2025. The reprieve will give Duterte time to rally support against any impeachment vote in the Senate. An impeach trial would have prevented Duterte from running for the 2028 presidency, which Marcos cannot contest due to a single-term limit for Philippine presidents.
Economic Risk – Stable at 7
The Philippines is the third largest economy in the Southeast Asian region after Indonesia and Thailand. The economy has been one of the most dynamic in the East Asia and Pacific region, powered by increasing urbanization, a growing middle class, and a large and young population. Services and manufacturing account for around 90% of GDP with the share of agriculture falling steadily to around 10%.
In its annual Article IV report on the economy, completed in October 2024, the IMF said in a press release that the Philippine economy has navigated well multiple external headwinds in recent years and remained among the best performing economies in the region.
The IMF said that the economy holds significant potential due to abundant natural resources, an untapped blue economy, and a sizable demographic dividend. However, it said that unlocking the medium-term growth potential “will crucially depend on comprehensive and well-sequenced structural reforms”.
These reforms, coupled with strengthened social protection programs, added the IMF, should aim to boost job creation, enhance productivity, increase resilience to climate change, and reduce poverty and inequality. It said priority areas included upgrading infrastructure, making significant investments in healthcare and education, addressing land fragmentation and low productivity in the agricultural sector, and enhancing governance. Finally, the IMF said that digitalization provided an important opportunity to improve access to quality education, promote financial inclusion, and enhance public spending efficiency.
However, an article in Fulcrum published by the Yusof Ishak Institute (ISEAS) in Singapore in November 2024, provides a far less rosy view of the Philippines economy. It argues that the country remains stuck in a lower-middle-income trap, and is lagging behind its ASEAN peers. It said that the mis management of the pandemic by former president Rodrigo Duterte meant that the pandemic scars on the Philippine economy are now permanent.
Consequently, the Philippines needs GDP growth in excess of 10% yearly to return to its pre-pandemic GDP trend. It added that Vietnam officially overtook the Philippines in per-capita income during the pandemic, “ a remarkable development because just a few decades ago, Vietnam was economically worse off than the Philippines.” The article also pointed out that the economy had been stuck in the lower middle income category since 1989 when the World Bank first developed its country classification by income.
The article however, also struck a note of optimism. It argued that given the Philippines is now a service-driven economy, with services accounting for 62.3% of GDP in 2023, it “seems to have largely missed out on the promise of industrialisation, insofar as industry — especially if export-oriented — holds out great potential technological progress and positive spillovers.” The article cited a World Bank study that showed “that Vietnam’s booming exports have made ripples across its economy so that even workers in non-export-oriented industries have benefitted”.
The author believes that Vietnam’s experience shows that it may not be too late for the Philippines to industrialise, explaining that the first step is to address the dearth of investments, especially in export manufacturing. He concluded, “It is not too late for the Philippines, but its leaders must step up and not be lulled into complacency by the sparkly growth figures.”
Commercial Risk – Stable at 7
The US State Department’s latest Investment Climate report on the Philippines, published in August 2024, says the government remains committed to improving its overall investment climate and sustaining economic growth.
The report adds that in recent years the country has taken steps to open new sectors of the economy to foreign investment. Amendments to the Public Services Act opened sectors such as railways, airports, expressways and telecommunications to 100% foreign ownership.
However, impediments to foreign investment – including poor infrastructure, high power and logistics costs, regulatory inconsistencies, a cumbersome bureaucracy, and corruption – have hampered the government’s efforts. Traffic in major cities and congestion in the ports remain barriers to doing business. Large, family-owned conglomerates dominate the economic landscape, sometimes crowding out smaller businesses.
The Philippines ranks joint 114th out of 180 countries in Transparency International’s 2024 Corruption Perceptions Index – lower than the likes of Thailand, Indonesia and Vietnam. According to the Philippines Corruption Report by GAN, high levels of corruption severely restrict the efficiency of businesses operating in the Philippines.
The country lies in 82nd place in terms of economic freedom, as ranked in the Heritage Foundation’s 2025 Index. The Philippines is ranked 16th out of 39 countries in the Asia-Pacific region. The country’s economic freedom score is higher than the world and regional averages. The Philippines’ economy is considered “moderately free” according to the 2025 Index.
NEW
Technology Risk – Stable at 6
The Global Innovation Index (GII), from the World Intellectual Property Organization, is an important index used by countries and multinational companies to assess innovation ecosystems and aid in policymaking and investment decisions.
The Philippines ranked 53rd out of 133 countries in the 2024 GII, down from 50th place in 2020.
The Philippines ranked 76th in the world for mobile speeds and 55th for fixed broadband speeds during November 2024. That marks a significant improvement compared to previous years. The Ookla Speedtest Intelligence carried out in July 2024 found the Philippines’ speed of 94.42 Mbps in Q2 2024 was behind some of its Southeast Asian peers’ median download speeds, such as Singapore (284.93 Mbps), Thailand (231.01 Mbps), Vietnam (135.00 Mbps), and Malaysia (132.72 Mbps).
Government policies
The Philippines has experienced a significant increase in the use of digital technology in several industries, primarily driven by a tech-savvy population, government policies that encourage digital adoption and investments both locally and internationally.
The Philippine Development Plan 2023-2028 specifies digital transformation as one of its underlying themes. The Philippines envisions achieving a robust digital economy to make the Philippines “globally competitive”. The goal is to bridge the “digital divide” across the archipelago, where nearly 40 percent of the country lacks reliable internet access.
The government has also recognized AI’s importance for economic growth and innovation, establishing initiatives such as the National AI Roadmap and the establishment of the National AI Research Center to foster AI adoption and research.
Infrastructure
The government has launched a National Fiber Backbone project aimed at building a cable network across the archipelago. Upon completion in 2026, the project should increase the broadband penetration rate nationally from 33% to 65% and reach 70 million out of the current 115 million population nationwide. It is also hoped the project will lower the price of internet connectivity.
Education and skilled staff
The Philippines is struggling to produce enough STEM graduates to meet demand with less than a quarter of senior high school students enrolled in STEM subjects. In AI, a shortage of skilled professionals with expertise in AI, has created a talent gap that has impacted the ability of companies to develop and implement sophisticated AI solutions.
August Bulletin
Political Risk – Stable at 8
Relations with China remain strained. In March, for example, the Philippine defence secretary issued an extraordinarily blunt statement describing China’s claims in the South China Sea as being “the biggest fiction and lie” that no Southeast Asian country would accept. He added that Chinese President Xi Jinping’s aggressive policies had undermined international goodwill fostered by his predecessors. The statement followed more incidents involving Chinese forces in the Scarborough Shoal, a hotly disputed fishing atoll.
Later in the month, Beijing expressed strong diplomatic and military concerns about US Defence Secretary Pete Hegseth’s visit to Manila. Beijing’s core concerns, according to the Diplomat publication, specifically focus on deepening Philippines-US military cooperation, which includes increasing combat-oriented joint military exercises, enhanced arms sales, and strategic military deployments. China is particularly alarmed at the US sale of 20 advanced F-16 Block 70/72 fighter jets to the Philippines.
Economic Risk – Stable at 7
The economy grew by around 5.6% in 2024 – the second fastest pace in ASEAN – largely driven by private consumption. Services and industry remained the main drivers of growth in sectoral terms, expanding by 6.7% and 5.6%, respectively. Construction also had a robust full-year growth performance of 10.3%, manufacturing rebounded.
The outlook for 2025 also remains positive. In mid-April, Nomura Global Markets Research forecast growth of 5.9% this year, only slightly down on an earlier 6% projection. Nomura citied headwinds from global trade tensions and higher US tariffs. It added that the impact of higher tariffs would be more modest compared to peers, while GDP would be supported by strong domestic demand and proactive policy measures.
The Philippines received more favourable treatment than some other Southeast Asian countries after President Trump initially imposed a tariff of 17% on the country in April, later pausing the tariffs for 90 days. However, in July, Trump imposed a rate of 19% for goods from the Philippines after a meeting with President Marcos in Washington while Manila has agreed to remove all its tariffs on American goods.
However, there are highly credible reports that the effective rate on the Philippines is just 6%. Marcos’ supporters said that Marcos’ trip helped secure and expand key exemptions embedded Trump’s executive order – particularly for electronics and semiconductors.
The country also plans to take advantage of the relatively low tariffs compared to Asian neighbours by exporting more semiconductors, coconut and mango products to the US. Finance Secretary Ralph Recto also said the Philippines could expand its share of the US market for garment exports, with major competitors like China, Bangladesh, Vietnam, Mexico, and India facing higher levies.
Inflation slowed to 1.8% in March 2025. its lowest annual rate in nearly five years as food and transport prices eased. In April, the central bank cut interest rates by 25 basis points to 5.5%, the fourth rate cut since last August. It is likely to continue easing monetary policy in response to a softening global economy and declining inflationary pressures. The bank cut its risk-adjusted inflation forecast for this year to 2.3% from 3.5%, and lowered next year’s to 3.3% from 3.7%.
The 2025 budget, unveiled in October, outlined a significant and well above inflation rate increase in spending of 10%, confirming the government’s commitment to raising public spending by borrowing. The forecast budget deficit of 5.3%, down from 5.6% in 2024, is based on the assumption that GDP will grow by at least 6.5 %, inflation will remain below 4%, and the benchmark interest rate will not exceed 5.5%.
Commercial Risk – Stable at 7
In March 2025, the ratings agency Fitch forecast that the country’s banking system’s credit profile will remain stable on the back of strong macroeconomic fundamentals. Earlier in the month, the agency hiked the banking sector operating environment score to “bbb-” from “bb+.” Fitch expected growth of 6% over the next two years to underpin banking business volume and keep impairment risks at bay.
It added that “rising geopolitical tensions and greater trade protectionism pose downside risk to the Philippines’ growth momentum, but we believe it is relatively insulated and more resilient than many of its export-oriented regional peers, given its lower reliance on merchandise exports.”
Technology Risk – Stable at 6
Artificial intelligence (AI) is rapidly becoming the norm in Philippine-based companies, according to PwC’s 2025 Global CEO Survey. PwC added that top officials at these corporations are also facing the challenge of having to upskill their workers to remain competitive and catch up with technological advancements.
Environmental, Social and Governance (ESG) – Stable at 8
The United Nations’ Sustainable Development Goals (SDGs) are recognised as a beneficial framework for responsible investment. The Sustainable Development Report from Cambridge University Press assesses the progress of all UN Member States on the SDGs. It provides a useful means of ranking Southeast Asian countries on their ESG progress.
The Philippines is ranked 92 out of 166 in the 2024 report, with a score of 67.5.
Environment: The Philippines faces four major environmental challenges, according to the environmental organisation Earth.Org. They are:
- Air pollution – stemming from the fact that over half of the population is dependent on the burning of fossil fuels to meet its daily energy needs. The World Health Organization says that air pollution kills around 120,000 Filipinos every year.
- Plastic pollution – around 2.7 million tons of plastic waste is generated every year. That stems from an insufficient waste-management system, coupled with a high dependence on single-use plastics.
- Marine pollution – around 20% of the plastic waste ends up in the sea. Theresa Lazaro, the country’s Foreign Affairs Undersecretary, has said that “there would be more plastics than fish by 2050, while oceans would be overheated and acidified if people fail to act now”. In recent years, the government has initiated various measures to curb marine pollution in the country.
- Rising sea levels – the sea level in Manila has been rising by around 2.6 centimetres per year, from an average rate of 1.3 millimetres per year in the 1900s, with groundwater use in the country’s capital enhancing the risk of sea-level rise, according to a Philippine Climate Change Assessment report published in July. The report concluded that the sea-level rise poses a significant threat to the Philippines, particularly in terms of inundation.
Social – According to the US State Department, the Department of Labor’s Bureau of Working Conditions monitors and inspects compliance with wage, hour, and health and safety laws in all sectors, including workers in the formal and informal sectors, and non-traditional labourers. However, labour groups say enforcement is lax particularly in terms of occupational safety and health standards in workplaces.
Governance – According to the US State Department’s 2024 Investment Climate statement, Responsible Business Conduct (RBC) is practised in the Philippines, although no domestic laws require it. The Philippine Tax Code provides RBC-related incentives to corporations, such as tax exemptions and deductions. Various non-government organizations and business associations also promote RBC. US companies report strong and favourable responses to RBC programmes among employees and within local communities.
August Bulletin
Environmental, Social and Governance (ESG) – Stable at 7
In January, the government announced it had entered into a significant partnership with Masdar, the United Arab Emirates’ state-owned renewable energy company, to develop a $15 billion renewable energy project. The project will involve building solar, wind, and battery energy storage systems capable of generating up to 1 gigawatt (GW) of clean power by 2030, with plans to expand capacity to 10 GW by 2035.
Latest economic data
f forecasts
* Official figures
Source: World Bank/International Monetary Fund, December Article IV consultation, except where stated
Useful links
https://www.transparency.org/en/cpi/2021
https://www.imf.org/en/Countries/PHL
https://www.adb.org/countries/philippines/main
https://business.inquirer.net/
https://mb.com.ph/category/business/business-news/
https://fulcrum.sg/about-fulcrum/
Source: Worldbox
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