From Services Powerhouse to Regional Growth Hub. The Philippines’ Next Economic Chapter
The latest OECD Economic Surveys: Philippines 2026 report delivers a clear message to investors and trading partners: the Philippines is one of the most dynamic emerging economies in the world, and with the right reforms, it could enter a new phase of sustained, productivity-driven growth. For companies looking to expand in Southeast Asia, the country offers a compelling mix of demographic strength, a growing services economy, and an increasingly open investment environment.
Over the past decade and a half, the Philippines has consistently ranked among the fastest-growing emerging markets. Economic output has more than doubled since 2010, while poverty has been reduced significantly. This progress has been supported by a young and expanding workforce, improving productivity, and strong performance in services exports. The country now has a population of more than 115 million people, with one of the youngest demographic profiles in the region, providing a powerful base for consumption, labour supply, and long-term economic expansion.
The economy has shown resilience even in the face of global shocks. After a temporary slowdown, growth is expected to strengthen again, with the OECD projecting GDP expansion of around 5.1% in 2026 and 5.8% in 2027. This recovery is expected to be driven by a rebound in investment, steady household consumption, and continued strength in the labour market.
A services-led growth model
One of the defining features of the Philippine economy is the dominant role of the services sector. Services account for more than 60% of economic output and have become the main engine of growth. In particular, the country has developed a strong global position in information technology and business process outsourcing.
The IT-BPO sector alone generates revenues equivalent to around 8% of GDP and employs approximately 1.8 million workers. This success is rooted in a combination of competitive labour costs, a large pool of educated workers, and one of the highest levels of English proficiency in Asia, making the Philippines a natural hub for international service delivery.
Key strengths of the Philippine services economy:
A large, young, English-speaking workforce
Strong global position in IT-BPO and business services
Remittances equivalent to about 7.5% of GDP, supporting consumption
Growing demand for financial, digital, and professional services
Trade patterns reflect this service-led model. While electronics and semiconductors dominate goods exports, the country’s services exports are unusually large for an economy at its income level. Business services, tourism, and IT-related activities are major contributors, with the United States, China, and Japan among the principal trading partners.
Untapped potential in manufacturing and investment
Despite these strengths, the OECD report highlights significant untapped potential, particularly in manufacturing and foreign investment. The Philippines has not fully benefited from the recent reconfiguration of global supply chains, which has seen companies diversify production across Southeast Asia.
Foreign direct investment has remained below levels seen in some neighbouring economies, and manufacturing growth has been constrained by structural challenges. High electricity costs, logistics inefficiencies, and complex administrative procedures continue to raise the cost of doing business. Industrial power prices are significantly higher than in regional competitors, and logistics expenses account for a much larger share of company revenues than in countries such as Indonesia, Thailand, or Vietnam.
Structural constraints identified in the report:
Electricity prices well above regional peers
Logistics costs accounting for about 27% of sales
Complex and fragmented permitting procedures
Lower levels of FDI compared with regional competitors
These constraints, however, also represent clear investment opportunities for companies in infrastructure, logistics, energy, and industrial development.
Reform agenda to boost productivity and investment
Recognising these challenges, policymakers have begun implementing reforms aimed at improving the business climate. Restrictions on foreign investment have been eased in several sectors, including telecommunications, transport, and infrastructure.
The OECD emphasises that achieving the country’s goal of tripling income per capita by 2040 will require a significant boost in productivity. This will depend on reforms that strengthen competition, reduce administrative burdens, improve governance, and further open the economy to international investors.
Demographics remain one of the country’s strongest assets. With nearly half the population under the age of 25, the Philippines offers a large and youthful labour force. However, only about one-third of workers are employed in the formal sector, and education outcomes remain a challenge. Addressing these issues through labour-market and education reforms will be essential to unlocking the country’s full potential.
Climate resilience and green growth opportunities
The OECD also highlights the country’s high exposure to climate risks, including typhoons, floods, and rising sea levels. In response, the government is pursuing a strategy that combines adaptation measures with emissions-reduction efforts.
Policies under consideration or implementation include renewable energy expansion, carbon pricing reforms, and a potential emissions trading system. These initiatives are expected to create new opportunities across several sectors.
Emerging green investment opportunities:
Renewable energy and grid infrastructure
Climate-resilient transport and urban systems
Insurance and risk-management solutions
Environmental and resource-efficiency technologies
A strategic market for global companies
Taken together, the OECD’s analysis presents a country at an important economic crossroads. The Philippines already benefits from strong growth, a large domestic market, and a competitive services sector. With continued reforms to improve infrastructure, governance, and investment conditions, it has the potential to become an even more attractive destination for international trade and capital.
For global companies, the message is clear: the Philippines is not just a fast-growing market, but a strategic platform for expansion in Southeast Asia. As supply chains diversify and new growth centres emerge, the country offers opportunities across services, manufacturing, infrastructure, technology, and green investment.
At Global Wisdom, we support companies looking to enter or expand in the Philippine market, helping them navigate the regulatory environment, build partnerships, and identify the sectors where growth is strongest. In a rapidly changing global economy, the Philippines stands out as one of the region’s most promising destinations for long-term business success.
📩 Talk to us today at mail@globalwisdom.group to explore how Global Wisdom can support your business and connect you with the right partners for growth.
Disclaimer:
This publication is intended to provide general information and does not constitute legal, financial, or investment advice. For specific guidance tailored to your organisation, please contact us.
