Asia – except PH – outpaces expectations in Q3

Philippines lone outlier as corruption probe, storms slowed growth; outlook cut

Asian economies exceeded growth expectations in the third quarter, with the Philippines emerging as the lone outlier as it lagged a regional upswing that has spurred outlook upgrades across its neighbors despite headwinds from higher US tariffs.

In a commentary, Khoon Goh, head of Asia Research at ANZ, said Asia’s economic expansion this year has been much better than expected, driven by front-loading of exports during the US tariff pause and higher spending on investments related to artificial intelligence.

For instance, third quarter growth in Taiwan, Vietnam and Malaysia beat consensus estimates by 1 percentage point or more, triggering upward revisions to growth projections for these economies.

Goh, however, said the consumption-reliant Philippines was the only economy to have surprised on the downside, prompting ANZ to slash its 2025 growth forecast on the country to 4.9 percent, from 5.4 percent previously.

The outlook for next year was also trimmed to 5 percent, from 5.2 percent earlier.

Zooming out, Goh said the more export-oriented economies have clearly performed better than the domestic-focused ones this year despite the global trade headwinds.

“Based on national accounts data for the third quarter reported so far, all economies apart from the Philippines have exceeded expectations,” he said.

Already, Economic Planning Secretary Arsenio Balisacan conceded that reaching even the low end of the government’s 5.5- to 6.5-percent growth target for 2025 has become “very challenging” after the economy expanded at a four-year low of 4 percent last quarter.

Figures showed state spending grew by 5.8 percent in the third quarter, the slowest pace since the same period in 2024, after the deepening corruption probe delayed public works as authorities grew more cautious in awarding contracts.

A notable weakness was also seen in consumer spending, which historically accounts for roughly 70 percent of total output.

Despite tame inflation and declining interest rates that could have bolstered households’ purchasing power, this key segment grew just 4.1 percent—a four-year low—after a series of powerful storms disrupted the local job market.

That said, there’s growing expectation now of a deeper rate-cutting cycle, with economists expecting additional easing moves from the Bangko Sentral ng Pilipinas in 2026.

But elsewhere in the region, ANZ’s Goh said Asia’s growth was likely to close 2025 on a strong note even as the export front-loading activity has ended.

“This will provide a solid base for 2026, especially with overall financial conditions in the region remaining very supportive,” he said. “As a result, the monetary policy easing cycle for Asian central banks will be coming to an end soon.”

Source: Inquirer

BPI sees Philippine economy growing at 5% level

Bank of the Philippine Islands (BPI) expects the economy to return to 5% growth next year, calling the third-quarter reading of 4% an anomaly and arguing that the government could eventually get a handle on the issues holding spending back.

“Next year, I think the economy should still grow about 5%. I think the Q3 number might be a one-off. It might spill a little bit to Q4 as the government tries to understand its spending. But I think as we roll into next year, we should hopefully get back to the 5% handle,” BPI President and Chief Executive Officer Teodoro K. Limcaoco told reporters.

Growth of 5% would be lower than the government’s official 6-7% gross domestic product (GDP) growth target for 2026.

Mr. Limcaoco said the third-quarter GDP reading was the result of the government having to rein in spending as it grappled with corruption in public works, particularly flood control projects.

“I guess it’s a little bit disappointing but not quite unexpected. I think the magnitude of the drop was a little surprising to everyone. But we (thought) that Q3 GDP would be slightly lower. We realized that with the current concerns about flood control, that government spending had been, I guess, reduced as they try to get things in order,” he said.

He added that bad weather dampened consumer spending during the period.

“Anecdotally, we’re hearing from our retail clients that September was a pretty weak month, primarily because of the weather,” Mr. Limcaoco said.

GDP grew 4% in the three months to September, the weakest in over four years and well below the 5.5% expansion in the second quarter and the 5.2% clip from a year earlier.

In the first nine months, GDP averaged 5%, well behind the pace of the government’s 5.5%-6.5% full-year target.

Mr. Limcaoco said the muted third quarter growth reading, paired with controlled inflation, points to a rate cut by the Bangko Sentral ng Pilipinas (BSP) in December.

However, he noted the central bank still needs to weigh how the Federal Reserve’s own easing cycle affects the peso.

“Obviously, some economists are saying that with the 4% Q3 growth, that there’s room for the BSP to cut. I think the BSP will have to take a look also at what the Fed is doing because they’ve got to watch out. Otherwise, there (could be an impact on) the currency,” he said.

The BSP last month reduced benchmark rates by 25 bps for a fourth straight meeting, bringing the policy rate to 4.75%. Since starting its easing cycle in August last year, the Monetary Board has cut rates by a total of 175 bps.

BSP Governor Eli M. Remolona, Jr. has said that another cut is possible at the central bank’s Dec. 11 meeting and further into next year amid a softening growth outlook.

Source: Business World

Philippines likely to miss 2025 growth goal

The Philippine Economy is unlikely to get the boost it needs in the fourth quarter to reach the low end of its full-year growth target, as public spending and investments are expected to remain subdued amid a widening corruption scandal, analysts said.

Analysts also said it is time for economic managers to revise their 5.5% to 6.5% gross domestic product (GDP) growth goal for 2025.

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said Philippine GDP is unlikely to grow by 6.9% in the fourth quarter to register at least 5.5% growth for the full year.

“The government’s economic team flagged slower public spending as a key drag on momentum. In response, I’ve adjusted my GDP targets for 2025 to 5.3% (from 5.7%), and for 2026 to 5.6% (from 5.8%),” he said.

Philippine GDP expanded by 4% in the third quarter, sharply slowing from the 5.5% in the second quarter and 5.2% a year ago, as public construction was hit by a corruption scandal involving infrastructure projects that has dampened consumer and investor sentiment.

This was the slowest pace since the 3.8% contraction at the height of the pandemic in the first quarter of 2021. Excluding the pandemic, this growth was the weakest since the third quarter of 2011.

This brought the nine-month average to 5%, slower than 5.9% in the same period last year.

Reinielle Matt M. Erece of Oikonomia Advisory and Research, Inc. said the economy is not likely to expand by 7% in the fourth quarter.

“We may expect it to grow by at most 5.2% given the momentum of the economy. Persistent pessimism, add to that the disappointing third-quarter GDP growth, would drag investments on a downward trend,” he said in a Viber message over the weekend.

Mr. Erece said that strong corporate earnings won’t be enough to counter the drag from transparency issues and economic disruptions from recent calamities.

Economy Secretary Arsenio M. Balisacan on Friday said hitting even the low end of the government’s 5.5% to 6.5% growth target will be “very challenging,” especially with more storms expected this quarter.

ING Bank Regional Head of Research, Asia Pacific Deepali Bhargava warned that sluggish government spending could become a longer-term drag on the economy, dampening both fiscal outlays, business and private sector sentiment.

Government spending rose by 5.8% in the third quarter, slowing from the 8.7% pace in the previous quarter, but faster than the 5% growth in the same period in 2024.

“While agriculture and private consumption are likely to rebound in the fourth quarter, investment and public spending may remain muted, keeping the overall GDP growth numbers subdued,” Ms. Bhargava said in a report on Nov. 7.

Citing the Business Outlook Survey, Ms. Bhargava noted the 12-month all-industry confidence index fell to its lowest since 2022 in the third quarter, with respondents most pessimistic about construction and real estate.

“Externally, export strength in Q3 provided some support, but this resilience may fade in 2026 as the full impact of higher tariffs takes hold, eroding competitiveness,” she said.

ING now sees 2025 GDP growth at 4.7%, down from its earlier 5.2% forecast.

‘UGLY ALL AROUND’

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco described the Philippines’ third-quarter GDP print as “ugly all around” and warned that the worst has yet to come.

“Looking ahead, things are likely to get worse before they get any better, as the anti-corruption drive in public infrastructure projects that has stymied activity only really started in the final month of the third quarter,” he said in a report on Nov. 7.

Mr. Chanco flagged deepening cracks in domestic demand, with sales data showing no signs of “light at the end of the tunnel” but more likely than not to bleed into the fourth quarter.

For Mr. Chanco, the only real bright spot was the export of services, which rebounded by 2.4% quarter on quarter.

“We’ve been downbeat on the economy’s growth prospects for some time, but it’s clear today that we’ll still have to downgrade our already soft 5.3% and 5.4% projections for this year and next, respectively,” he said.

Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in an e-mail that 4% growth in the third quarter reflected impact of tighter financial conditions, slower government spending, and lingering external headwinds.

“While household consumption remained resilient, the drag from weak capital formation and subdued exports underscores the need for stronger public investment execution and targeted support for trade-sensitive sectors,” he said in a Viber message.

In the third quarter, household final consumption expenditure, which accounts for over 70% of the economy, grew by a slower 4.1% from 5.3% in the second quarter and 5.2% a year ago.

Gross capital formation, the investment component of the economy, contracted by 2.8% versus the 12.8% growth a year ago and the 1.2% expansion in the second quarter.

Capital Economics noted that the Philippines’ third-quarter performance contrasted sharply with most of the region — including Taiwan, South Korea, and Vietnam, where growth accelerated during the period.

“Heightened uncertainty and fears of exposure may deter firms from committing to new investment projects, while delays in public procurement will weigh further on demand,” it said, saying that weakness in activity is likely to persist through 2026.

Despite the absence of widespread political unrest, Ms. Bhargava said the expansion of the anti-corruption campaign risks prolonging the economic slowdown.

“It’s sad that neighboring ASEAN (Association of Southeast Asian Nations) countries such as Vietnam are growing at such a robust pace compared to us. We lack competitive industrial policy, inclusive opportunities, and most importantly, good governance,” Mr. Erece said.

Finance Secretary Ralph G. Recto earlier said the economic fallout from the corruption scandal is “temporary,” adding that he projects an economic rebound in 2026.

Mr. Ravelas said that for investments to rebound in the fourth quarter, the government has to “fix the corruption issue and restore public trust.”

“For now, monitor fiscal policy execution closely. If spending remains subdued, private sector resilience and investment will be critical to sustaining growth,” Mr. Ravelas said.

MORE ROOM FOR BSP CUT

Meanwhile, weak economic prospects and the easing inflation outlook would give the Bangko Sentral ng Pilipinas (BSP) ample room to continue its easing cycle, analysts said.

Capital Economics said in a report that the recent GDP result “confirmed” the chances of the BSP cutting rates at its Dec. 11 meeting.

“We continue to expect two more 25-basis-point (bp) rate cuts this cycle (one before yearend and another in early 2026) but the risks are skewed towards more easing than we currently anticipate,” it added.

ING’s Ms. Bhargava said the slower third-quarter print strengthens their call for a 25-bp rate cut in December.

Since it began its easing cycle in August 2024, the Monetary Board has cut its key policy rate by 175 bps to a three-year low of 4.75%. 

BSP Governor Eli M. Remolona, Jr. has signaled further easing until next year to help support domestic demand as the corruption mess dampened investor sentiment and economic prospects.

“With inflation easing and the BSP likely to pivot to a more accommodative stance in early 2026, apart from the 25-bp cut in December,” Mr. Asuncion said.

In the 10-month period, inflation averaged 1.7%, matching the BSP full-year forecast and still within its 2-4% target.

“Nevertheless, we expect growth to regain momentum, though risks from global demand and fiscal constraints remain,” Mr. Asuncion said.

Source: Business World