Philippine growth slumps to 4.4% in 2025

Philippine economic growth sharply slowed to a post-pandemic low in the fourth quarter of 2025 as the flood control scandal continued to weigh on government spending, investments and consumer spending, dragging full-year expansion below target for the third straight year.

The Philippine Statistics Authority (PSA) reported on Thursday that the fourth-quarter gross domestic product (GDP) expanded by 3%, from 5.3% in the fourth quarter of 2024 and the revised 3.9% print in the third quarter of 2025.

The slowdown came as a surprise as the fourth quarter is typically a strong period for growth, thanks to holiday spending. The latest print stands out as the weakest fourth-quarter performance in five years or since the 8.2% contraction in the fourth quarter of 2020.

Excluding the pandemic period, it was the worst quarterly growth rate in 16 years or since the 1.8% in the fourth quarter of 2009, but matched the 3% in the third quarter of 2011.

On a seasonally adjusted quarter-on-quarter basis, the economy grew by 0.6%.

In 2025, the economy expanded by 4.4%, much weaker than the 5.7% growth in 2024.

This was the weakest pace in five years or when GDP declined by 9.5% in 2020.

Excluding the pandemic, it was the slowest growth since the 3.9% expansion in 2011.

The full-year average also fell below the Development Budget Coordination Committee’s (DBCC) 5.5%-6.5% goal.

Economy Secretary Arsenio M. Balisacan said the slower growth reflected the impact of adverse weather on economic activity and the corruption scandal on consumer and investor sentiment.

“Admittedly, the flood control corruption scandal also weighed on business and consumer confidence. These challenges unfolded alongside lingering global economic uncertainties,” he said.

Mr. Balisacan, who earlier expected full-year growth to come in at 4.8-5%, said he did not expect such a “sharp” slowdown. However, he said economic managers had expected there would be consequences for the reforms that were put in place in the aftermath of the graft scandal.

“It cannot be business as usual. Because otherwise, we may have growth this year, or last year, growth may be higher, but with corruption all over the place, or in infrastructure. That (growth) would not be expected to last. We would better have a slowdown, correct the problems, and build the trust of our people in the government,” Mr. Balisacan said.

A scandal linking government officials, lawmakers and private contractors to multibillion-peso corruption in flood control projects had dragged government spending and household consumption since the third quarter last year.

WEAK CONSUMPTION

In the fourth quarter, household consumption, which accounts for over 70% of the country’s GDP, rose by 3.8%, slowing from 4.7% a year ago and 4.1% in the third quarter. This was the slowest household spending growth since the -4.8% seen in the first quarter of 2021.

For the full-year, consumption growth slowed to 4.6% from 4.9% in 2024.

Meanwhile, government spending grew by 3.7% in the fourth quarter, weakening from 9% in the same period in 2024 and 5.8% in the third quarter. It was also the slowest since 2.6% in the first quarter of 2024.

Of the total, state expenditures in construction declined by 41.9% during the last three months of 2025, as the government increased scrutiny over infrastructure projects.

In 2025, government spending grew by 9.1%, faster than 7.3% in the previous year.

Mr. Balisacan said the government’s catch-up plan could help boost public spending, particularly construction, in the first quarter.

“The release of the approval of the budget for 2026 was delayed a bit,” he added. “And so that could also have a negative effect on spending, particularly for public construction.”

PSA data also showed that the country’s gross capital formation, the investment component of the economy, declined by 10.9% in the fourth quarter, the biggest drop since early 2021. This was a steeper decline than the -2.8% in the third quarter and a reversal from the 5.5% growth in the fourth quarter of 2024.

For 2025, investments fell by 2.1%.

BETTER EXPORTS

Meanwhile, exports growth provided some relief for the economy as it climbed by 13.2% in the fourth quarter, from 3.2% a year earlier and 7.4% in the third quarter. For the entire year, exports grew by an annual 8.1%.

Imports, meanwhile, expanded by 3.5% in the October-to-December period, from 2.7% in the previous year and 3.2% in the previous quarter, bringing its full-year growth to 5.1%.

The government forecasts goods exports and services exports to rise by 2% and 5%, respectively, this year.

According to the PSA, the agriculture, forestry, and fishing (AFF) sector posted 1% growth in the fourth quarter, while services expanded by 5.2%. However, the industry sector saw a 0.9% contraction in the fourth quarter.

In 2025, the AFF, services and industry sectors grew by 3.1%, 5.9%, and 1.5%, respectively.

National Statistician Claire Dennis S. Mapa said wholesale and retail trade and repair of motor vehicles and motorcycles were the top contributors to the country’s expansion.

Meanwhile, the Philippines’ gross national income went up by 3.9% in the fourth quarter. By yearend, it rose by 6.1%, easing from 7.7% in 2024.

The country’s net primary income likewise increased by 10.9% in the October-to-December period, bringing the 2025 average to 19.1%. This slowed from 26.6% in the prior year.

DELAYED RECOVERY

Meanwhile, Mr. Balisacan said the country’s chances for an early rebound might now be lower.

“(W)e see 2026 as a rally point for us,” he said. “And with all these developments taking place and our chairmanship of the ASEAN (Association of Southeast Asian Nations), it should be able to turn the corners around and get the economy back on its track as early as the… second quarter of this year.”

He noted that the lingering effects of the corruption mess and the delayed approval of the 2026 budget could prevent the economy from recovering in the first quarter of the year.

“We don’t expect that growth will recover to its peak in the first quarter because we expect some still lingering effects of those measures, especially that the budget for this year was released or was approved late,” he said.

On Jan. 5, President Ferdinand R. Marcos, Jr. signed the 2026 General Appropriations Act, allotting a P6.793-trillion budget for the government.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said the economic lags experienced in the fourth quarter may continue to spill over to the country’s near-term growth prospects.

“All this weakness looks set to bleed into the early part of this year, as we’ve yet to see any bottoming-out in government infrastructure spending in the monthly numbers, while surveyed expansion plans in the private sector continue to roll over sharply,” Mr. Chanco said.

The outlook for the Philippine economy remains dim, especially if persisting governance issues will be left unresolved, ANZ Research Chief Economist for Southeast Asia and India Sanjay Mathur noted. 

“Looking forward, growth is likely to remain weak until governance-related issues are resolved, and public spending begins to improve,” he said in a report. “While support from net exports will likely be sustained over the next few months due to the AI (artificial intelligence)-related technology cycle, its overall impact will be limited.”

Meanwhile, Chinabank Research said the economy’s underperformance in the fourth quarter calls for a more urgent implementation of reforms, adding that the global uncertainties endanger the country’s external position. 

“This underscores the need to further weather-proof the economy and quickly rebuild public confidence to support domestic demand, especially since the external front faces persisting headwinds from a highly uncertain and volatile global environment,” it said.

This year, the DBCC is targeting 5%-6% GDP growth.

Source: Business World

Gradual recovery seen following growth miss

Economic growth is expected to gradually recover this year on the back of increased government spending and exports, a Cabinet official said, following a marked slowdown in 2025.

“[T]he whole year [has] four quarters right?,” Finance Secretary Frederick Go told reporters on Friday.

“We’re not going to get there in the first quarter ... I guess, if we do everything right, it’s progressive. It’s [going] to happen progressively.”

Gross domestic product growth slumped to 4.4 percent in 2025, from 5.7 percent a year earlier, as a massive corruption scandal weighed on spending and sentiment.

The result marked the third year that the government missed its growth targets, although officials have expressed optimism of a rebound beginning 2026.

The target for this year has been lowered to 5.0-6.0 percent from 6.0-7.0 percent to take into account the continued impact of the corruption issue and external uncertainties. That for 2027 was also cut to 5.5-6.5 percent from 6.0-7.0 percent.

Go claimed that foreign investors remained interested in the country and added that exports would play a significant role in boosting economic growth.

“Export actually is the bright spot in all of that, when you look at [gross domestic product] growth,” he said.

Government spending, which slumped in the third and fourth quarters, is expected to improve, and Go said that the Finance and Budget department met earlier this week to clear the amount to be spent for January-March.

“Actually I can give you the number — it’s P1.4 billion for primary spending for the first quarter,” he said.

The “top spenders,” which include the Department of Public Works and Highways, the Department of Education, the Department of Health, the Department of Agriculture and the Department of Transportation, were also present during the meeting.

“We agreed with them what their spending will be, how much money will be released,” Go said.

As for the revenue agencies, he said “The BIR (Bureau of Internal Revenue) has their targets, the BOC (Bureau of Customs) has their targets.”

“I think their targets are achievable — I’m hopeful we will achieve those targets.”

Revenue goals have been lowered given downwardly revised economic growth targets, with the government now aiming to collect P4.824 trillion this year instead of P4.983 trillion.

The target for next year was likewise reduced to P5.122 trillion from P5.366 trillion while in 2028, collections were now projected to reach P5.568 trillion instead of P5.914 trillion.

Based on earlier data, the BIR has been tasked to collect P3.431 trillion, lower than the P3.579 trillion under the 2026 Budget of Expenditures and Sources of Financing.

The BOC goal was likewise reduced to P1.003 trillion from P1.013 trillion. Nontax revenues, on the other hand, were set at a higher P349.9 billion from P249.1 billion.

Both agencies missed their targets last year. The BIR collected P3.105 trillion, short of its P3.232-trillion goal, but this was still above the P2.83 trillion recorded in 2024.

The BOC, meanwhile, generated P934.4 billion, below the P958.7-billion target, although this was again higher than the P916.674 billion collected in 2024. 

Source: Business World

Investments recovery key to growth rebound

A rebound in public and private investments could lead to gradual economic gains for the Philippines and a return to 6.0-percent growth, a senior Asian Development Bank (ADB) official said.

“I guess the main variable for 2026 is how fast does the public investment recover,” ADB Country Director Andrew Jeffries told reporters on the sidelines of the Bangko Sentral ng Pilipinas’ (BSP) Annual Reception for the Banking Community last Friday.

“[W]e were thinking maybe two quarters,” he added, with the last six months of this year setting the stage for a stronger expansion in 2027.

For 2026, he said: “Imagine a slower quarter one and maybe a little better quarter two and then maybe a little better quarter three and a good quarter four.”

A return to 6.0-percent growth is possible, but Jeffries stressed that “high investment, public and private... would be, to me, the key driver... the other things seem to be going pretty well.”

He also said that exports would have to improve for long-term economic growth and economic resiliency, which will require sustained reforms, stronger investment promotion, and improvements in the business environment.

“It’s not something that happens overnight,” he said. “But, you know, neighbors have done it, and the Philippines can do that.”

Citing “reduced public infrastructure spending,” the Manila-based lender last month lowered its 2025 and 2026 growth forecasts for the Philippines to 5.0 percent and 5.3 percent, respectively, from 5.6 percent and 5.7 percent.

The country enjoyed a run of above 6.0-percent growth before the Covid-19 pandemic hit, leading to a 9.5-percent plunge in 2020. It saw a recovery in the following two years, recording a spike of 7.6 percent in 2022, but then posted below-target results of 5.5 percent and 5.7 percent in 2023 and 2024.

A 5.5- to 6.5-percent expansion was targeted for 2025, and despite a middling start to the year, officials expressed hope of a return to target. A massive flood control project scandal, however, led to a marked third-quarter slowdown that likely extended to the rest of the year.

A third straight growth miss and a marked full-year slowdown to below 5.0 percent are expected to be announced this Thursday.

BSP Governor Eli Remolona Jr. has said that 2025 growth could have slowed to 4.6 percent, while Socioeconomic Planning Secretary Arsenio Balisacan has predicted a 4.8- to 5.0-percent outcome.

Earlier this month, Remolona said the corruption scandal would have “a long impact” on economic growth, with the loss of confidence among investors and households possibly extending up to the first half of 2026.

Still, he expects a recovery to 5.4 percent this year and a further improvement to 6.0–6.2 percent in 2027, within the downwardly-revised targets of 5.0–6.0 percent and 5.5–6.5 percent.

Source: Manila Times