By Alvin Toh, Co-Founder, Straits Interactive
Market projections in the Philippines indicate that the country's AI sector is set to grow at an impressive annual rate of 41.5 percent between 2025 and 2030, catapulting the market volume to P82.09 billion by 2030.
This surge is fueled by government initiatives in innovation and technology, alongside increasing demand for more interactive and immersive content in entertainment and advertising sectors. With this upward trend in AI adoption, the Philippines stands to solidify its role as one of the global leaders in business process outsourcing (BPO).
However, adopting AI is not merely about keeping up with trends. Filipino businesses must act strategically, balancing innovation with governance, to leverage opportunities and mitigate risks. Here are five AI breakthroughs set to impact the Philippine economy in 2025, and how local entrepreneurs can prepare.
Productivity Boosts With Affordable, Creative AI Tools
Driven in part by the introduction of more multimodal features last year, generative AI has continued to expedite content creation, marketing, and design — critical sectors for the Philippines' thriving BPO and creative industries. People are upskilling too. A look at Microsoft's 2024 Work Trend Index Annual Report reveals that globally, professionals like graphic designers, marketers, and entrepreneurs are rapidly gaining in AI aptitude to stay competitive. However, AI adoption has traditionally been limited by high computational costs.
This is changing in 2025, as advancements in AI infrastructure enable lower cost barriers. Technologies such as Amazon's Trainium chips, NVIDIA's Blackwell architecture and DeepSeek's R1, slash computational expenses, making enterprise-grade AI more accessible and affordable to small and medium-sized enterprises (SMEs). SaaS-based AI platforms with pre-configured solutions also reduce the need for technical expertise. These advancements let smaller firms generate social media campaign ideas, draft content, write proposals, or prototype products at a fraction of traditional costs.
Still, precautions must be taken in the integration of new technologies. Organizations must always check the provider's privacy policies and terms of use to ensure compliance with regulations like the General Data Protection Regulation (GDPR) or the Philippine Data Protection Act (DPA). It is advisable to go for trusted cloud platforms with robust security features, such as encryption and access control.
One major limitation of existing AI platforms has been in retaining contexts over extended conversations. However, this is changing with advancements in AI's memory. Google's Gemini 1.5 model, with its million-token long context window, could retain and synthesize multimodal information across multiple interactions.
For Filipino businesses managing remote or hybrid teams, this means AI assistants can deliver more contextualized solutions in resolving workflow gaps, such as tracking project timelines and discussion histories, drafting meeting minutes and facilitating handovers between team members. Real-time decision support could be rendered from the analysis of years of sales and customer data. This capability is particularly valuable for cross-functional teams working on long-term projects, where fragmented knowledge often leads to inefficiencies. With the ability to articulate multifaceted information coherently, AI could be powerful in aligning all stakeholders.
Data-Driven Decisions With Transparent AI Reasoning
AI models are improving in complex reasoning, which would enable Philippine businesses to conduct strategic planning, risk assessments, and predictive analytics with greater accuracy. Advanced models like OpenAI's latest o-series, have now integrated chain-of-thought reasoning that provides transparent, step-by-step explanations for their outputs.
This improved explainability enhances trust in AI-driven insights and allows companies to make more informed decisions. Applied to the finance industry, this could enable more accurate risk assessments for loans or investments, or even real-time fraud detection. The accessibility of AI-powered analytics will help SMEs compete with larger firms too. They will be better equipped to predict risks, respond to market changes, and uncover new revenue opportunities, ultimately driving sustainable growth and profitability.
AI Bridges The Knowledge, Skills Gap In An Aging Workforce
According to the Philippine Statistics Authority (PSA) the number of Filipinos aged 60+ was 9.22 million in 2022 (up from 4.56 million in 2000). Projections suggest this group will grow to 19 million by 2035–2040, making it the fastest-growing demographic of the Philippine population. In the face of a shifting workforce demographic where companies risk losing institutional knowledge and expertise as its veterans leave, AI offers a lifeline.
Small language models (SLMs), a more cost-effective alternative to large language models (LLMs), can be trained on internal company data that captures retiring experts' knowledge and proprietary information. From this, businesses can create AI-powered knowledge assistants that provide on-demand, context-aware, personalized guidance to new and existing employees. Deploying SLMs in local languages like Tagalog or Bisaya would avail AI capabilities like these for workforce development nationwide. Perhaps, even enabling AI-driven training programs for the reskilling of older employees to ensure they remain valuable contributors to the workforce.
Of course, where organizational data is involved, there are governance aspects to consider. As more entities seek to develop AI models trained on proprietary data, this elevates the urgency of an organization's data readiness. Robust data handling practices are a must to avoid the inadvertent inclusion of personally identifiable information (PII) in training datasets.
Agentic AI: Your New Digital Colleague
As businesses move beyond generic AI tools to industry-specific solutions, autonomous AI agents are the next frontier. These agents could help companies optimize complex operations and improve service delivery without human intervention. For instance, agents could coordinate patient referrals between hospitals and clinics in the vast health care system. When applied to customer service, they can enhance user satisfaction and ease employee workloads by managing inquiries and escalating it if necessary.
While these AI agents can perform sophisticated tasks, it is important not to confuse them with artificial general intelligence (AGI). They still require human oversight and cannot be liberally applied to other domains that they are not programmed for. This level of autonomy must be balanced with an understanding of their limits and attention to their alignment with business goals and ethical guidelines.
For Filipino entrepreneurs and business professionals, 2025 could be the start of serious digital transformation. AI offers unprecedented efficiency, creativity gains and economic growth, but success hinges on strategic, ethical adoption. By embracing governance and workforce training, businesses can turn disruption into opportunity — securing the Philippines' position as an AI hub.
This article was first published on The Manila Times on 23 February, 2025.
