By Isa Jane D. Acabal, Researcher
THE PHILIPPINE ECONOMY it is likely to expand at a slower pace in the fourth quarter of 2025, bringing the full year’s growth below the purpose of the government between a a corruption scandal, analysts say.
Gross domestic product (GDP) is likely to grow by 4.2% annually from October to December, according to the median forecast of 18 economists polled BusinessWorld.
If seen, growth is much slower than the 5.3% increase over the same period in 2024. Quarter on quarter, GDP growth picked up from a four-year low of 4% in the third quarter.
This would put average growth in 2025 at 4.8%, missing the Budget Coordinating Committee’s target of 5.5%-6.5%.
If possible, this would be slower than the 5.7% increase in 2024 and the weakest since the 9.5% contraction posted in 2020.
The full-year GDP estimate is below the forecasts of the Asian Development Bank (5%), the World Bank (5.1%), the International Monetary Fund (5.1%), and the ASEAN+3 Macroeconomic Offsnow (5.2%).
The Philippine Statistics Authority (PSA) will release the fourth quarter and full year of 2025. GDP data on Thursday, Jan. 29.
Harumi Taguchi, chief economist at S&P Global Market Intelligence, said weak government spending slowed growth in the fourth quarter and the full year.
“We expect weaker government spending and less consistent public investment, reflecting the impact of ongoing corruption issues,” he said in an email.
A massive dispute involving Public Works officials, legislators and private contractors over multibillion-peso corruption in flood control projects has dramatically dragged down government spending and household spending. The Independent Infrastructure Commission (ICI) has been investigating these allegations.
Government spending fell for the fourth consecutive month in November to P498.31 billion, down 9.6% year-on-year.
“In terms of government spending, we will probably see a real short-term damage caused indirectly by the formation and investigation of the ICI, which really started at the end of Q3. (Fourth quarter), therefore, we should feel the pain of this natural silence and doubt on the part of both public and private developers,” said Miguel Chanco, emerging chief economist in Asia.
Ruben Carlo O. Asuncion, an economist at the Union Bank of the Philippines, said the slow annual GDP growth reflects the impact of the corruption scandal.
“This weakness reflects the wider conflict in the investigation into the corruption of the flood control system, which has slowed down social construction, financial delay Funds issued, and the burden on consumers and businesses at the end of the year. there is also the creation of job opportunities.”
Patrick M. Ella, an economist at Sun Life Investment Management and Trust Corp., said the decline in consumer and investor confidence following the graft scandal “reversed in lower consumption and a decline in private investment.”
“The decrease in government spending following the scrutiny of higher funds has hit the economy hard in the year. The effect of multiplying government spending is decreasing, reducing aggregate demand and harming economic growth,” said Marco Antonio C. Agonia, an economist at the University of Asia and the Pacific (UA&P), said.
Besides weak government spending, natural disasters have hampered infrastructure development and economic activity, according to Angelo B. Taningco, chief economist at Security Bank Corp.
In 2025, a total of 23 typhoons entered the Philippine Area of Responsibility, as recorded by the weather bureau.
Mrs. Taguchi said that natural disasters have also affected agricultural production, affected the purchase of goods and production, tourism, and retail sales.
“Private consumption and private investment are expected to see moderate growth, driven by adverse weather conditions in the fourth quarter of 2025,” he added.
MEASURES TO GIVE
Maybank Investment Bank economist Azril Rosli said the GDP growth was mainly due to “steady” private consumption supported by lower inflation, rate cuts by the Bangko Sentral ng Pilipinas (BSP), and a “modest” recovery in exports.
Inflation accelerated to 1.8% in December from 1.5% in November, bringing average inflation for the full year to 2025 to 1.7% – the slowest pace in nine years.
“Inflation in the last few months was the result of good results and the continued decline in rice and energy prices throughout the period,” said Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., in an e-mail.
“A quick step in the financial environment to raise funds is likely to help spark investment momentum,” he added.
The BSP lowered its key borrowing costs by a total of 125 basis points by 2025, bringing the key policy rate to a three-year low of 4.5%.
“The BSP’s interest rate cuts so far should not have a meaningful impact on economic growth, and it shows how weak the year 2025 is. The transmission of devaluation to strong activity in the real economy is naturally long in emerging markets like the Philippines, one thing the BSP is well aware of,” said Mr. Chanco of Pantheon Macroeconomics.
Mr. UA&P’s Agonia said the impact of the devaluation on the real economy is minimal in the short term as monetary policy actions have a lag of one and a half to two years.
“The reduction in prices made in 2025 will give a noticeable boost to the performance of the economy only in the second half of 2026 and 2027,” he added.
At the same time, strong exports and a reduced trade deficit are likely to drive GDP growth amid “strong foreign demand for semiconductors and continued efforts to diversify between protectionist policies in [United States],” said Chinabank Research.
Preliminary data from the PSA showed the country’s trade balance – the difference between exports and imports – fell to $3.51 billion annually in November from a $4.19-billion deficit in October.
Exports rose 21.3% to $6.91 billion in November, faster than the 20.3% growth registered in October. This was mainly due to an increase in electrical products by 50.6% to $4.19 billion.
“Average global growth limited our expected export growth in 2025, although the impact of the US tariff hike was less than expected,” said Ms. Taguchi of S&P Global.
BACK IN 2026?
This year, economists expect a gradual recovery in GDP growth as the government spends on matching funds.
“In order to boost growth by 2026, the policy focus must shift to strong fiscal spending, accelerated infrastructure and energy investment, improved disaster resilience, and deep structural reforms to focus on private investment and improve export competitiveness,” said Mr. Rosli of Maybank.
“Financial easing alone is unlikely to deliver growth without these accompanying measures,” he added.
Chief Economist Rizal Commercial Banking Corp. Michael Ricafort said the government’s money laundering and other anti-corruption efforts are expected to boost growth in the first quarter.
“If anti-corruption measures and other important reforms that improve governance standards are not taken seriously, these could be important lost incentives that could help improve investor confidence,” said Mr. Ricafort.
Jonathan L. Ravelas, senior consultant at Reyes Tacandong & Co., said economic growth could rise to 5.6% by 2026 “if the government focuses on clean and timely spending, strong infrastructure delivery, predictable policy signals, and real support for agriculture and small businesses.”
Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. he said the economy may see better numbers in the second half of 2026 if there are fewer natural disasters.
“It was disappointing, of course, since our potential growth is closer to 6% to 8%. Improving the quality of public spending by closing all kinds of conflicts of interest is what is needed for the economy to return to its full potential,” said Mr. Neri.
Economists expect GDP to grow by 5-6% this year.
