The World Bank has maintained its growth forecasts for the Philippines for this year until 2026 on expectations of easing inflation, strong domestic demand as well as improved trade performance.

The multilateral lender's Philippine Economic Update (PEU) report showed the country is expected to grow by 5.8 percent this year, unchanged from the forecast the World Bank provided in April.

The latest growth forecast is faster than the 5.5 percent gross domestic product (GDP) growth posted in 2023, but below the government's six to seven percent target for this year.

For 2025 and 2026, the World Bank also retained its annual growth outlook for the Philippines at 5.9 percent.

This is also lower than the government's 6.5 to 7.5 percent economic growth target for 2025 and the 6.5 to eight percent growth goal for 2026.

World Bank senior economist Ralph Van Doorn said the growth forecasts are based on the assumption that inflation would ease.

The PEU showed the World Bank expects inflation in the country to average at 3.6 percent this year and ease further to 3.2 percent next year and to three percent in 2026 from last year's six percent.

Van Doorn said the 'assumption is that inflation will remain in the comfort zone of the central bank and then leading to conditions that allow the central bank to lower the policy rate.'

A more accommodative monetary policy is expected to support private domestic demand.

Van Doorn also said the growth forecasts are based on the expectation that global growth would be picking up again, which will lead to increased trade and strengthen demand for Philippine exports.

He said pro-investment reforms undertaken by the previous government and the current administration like the Public Service Act amendment and the new Public-Private Partnership Code are likewise expected to support the country's economic growth.

'We assume that a lot of these reforms are being implemented and will lead to actual investments that are coming to the country and lead to a more productive capacity of the country,' he said.

The economy is also expected to benefit from the government's commitment to shore up public investment, with public investment plans averaging 5.7 percent of GDP from 2024 to 2026, including 124 new flagship infrastructure projects.

With the Philippines seeing steady and resilient growth, Van Doorn said the World Bank expects the country to attain the upper middle-income status in the next two to three years.

Last month, National Economic and Development Authority Secretary Arsenio Balisacan said the agency is hopeful the country could achieve upper middle-income status toward the latter part of 2025.

With a gross national income per capita of $3,950, the Philippines is currently classified as a lower middle-income country.

Risks that may affect the World Bank's growth outlook include higher than expected inflation, extreme weather and climate change, global geopolitical tensions and a sharper economic slowdown in China.

A prolonged El Niño event and La Niña may also strain domestic food supply and push up inflation.

'To manage inflation, the continued implementation of non-monetary strategies is essential, including efforts to optimize supply and demand management and to secure timely and adequate imports of staple food items,' Van Doorn said.

He said the government would also need to continue providing social assistance to vulnerable groups that are disproportionately affected by high food inflation.

To support the country's development priorities, the World Bank also emphasized the need to enhance revenue collection.

For the multilateral lender, additional revenue efforts could focus on broadening the tax base, rationalizing tax incentives, strengthening tax administration and improving collection efficiency.

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