Q1 growth below expectations

Economic growth edged up in the first quarter (Q1), the Philippine Statistics Authority (PSA) reported, but was lower than expected and also fell short of the government's full-year target.

At 5.4 percent, gross domestic product (GDP) growth was slightly higher than the 5.3 percent recorded in the last three months of 2024. It was lower than the 5.9 percent seen a year earlier, however, and missed the 6.0- to 8.0-percent goal for 2025.

Analysts polled by The Manila Times expected a 5.8-percent result.

The slower-than-expected expansion, along with below-target inflation, could prompt the Bangko Sentral ng Pilipinas (BSP) to continue low-ering key interest rates.

ANZ Research, which described first-quarter GDP growth as "lackluster," said the BSP's policy rate could be cut to 5.0 percent by the end of the year.

With the effects of US President Donald Trump's tariff policies still to be fully felt, it reiterated a forecast of full-year GDP growth of just 5.0 percent for the Philippines.

'A measured start'

Socioeconomic Planning Undersecretary Rosemarie Edillon called the first-quarter showing a "measured start" with "many layers."

"While this pace (5.4 percent) falls short of our initial expectations, it reflects developments from the broader global context of tempered economic activity amid persistent uncertainties," she added.

The Philippines remained resilient, Edillon pointed out, with growth second-highest among Asian neighbors that have so far released first-quarter data.

The country grew faster than Indonesia (4.9 percent) and Malaysia (4.4 percent), and likely also outpaced Thailand, which is expected to re-port 2.8-percent growth. It tied with China, and only Vietnam grew faster at 6.9 percent.

Positive results

All major economic sectors posted positive results, the PSA said, with agriculture, in particular, expanding by 2.2 percent from just 0.5 percent a year earlier. Industry and services, however, saw growth ease to 4.5 percent and 6.3 percent, respectively, from 5.2 percent and 7.0 per-cent.

Services accounted for 62.2 percent for first-quarter GDP, up from 61.6 percent a year earlier, while industry saw its share dip to 29.5 per-cent from 29.8 percent. Agriculture contributed the least at 8.3 percent.

"These figures reflect a stable, albeit cautious, expansion across sectors," Edillon said.

On the demand side, household spending growth rose to 5.3 percent from 4.7 percent and government expenditures also surged by 18.7 percent from 2.6 percent in January-March last year.

Gross capital formation also grew by a markedly higher 4.0 percent from 0.8 percent. Exports growth slowed to 6.2 percent from 8.1 per-cent, but imports accelerated to 9.9 percent from 2.2 percent.

External trade, said Edillon, was a "mixed picture" and reflected "business strategies that were employed in anticipation of greater uncertain-ty in global trade."

Domestic demand, meanwhile, was described as a "key pillar of growth"

6.0 percent still achievable

Finance Secretary Ralph Recto, meanwhile, also said that GDP growth highlighted the "continued strength and resilience of the Philippine economy, even amid rising global uncertainties."

"Our growth is strong, inflation continues to ease, private consumption is rising, and our job market remains vibrant. These are clear signals of accelerating domestic demand ahead, which is our strongest shield against external headwinds and trade wars."

He said the government remained confident of achieving 6.0-percent growth in the following quarters on the back of continued fiscal con-solidation, lower inflation and progress in trade negotiations.

Recto noted that revenue collections stayed on track during the quarter and added that April's 1.4-percent inflation — below the BSP's 2.0- to 4.0-percent target — provided more room for further interest rate cuts.

Trade Secretary Cristina Roque said the government was committed to building growth momentum via initiatives such as attracting high-quality investments and empowering the micro, small and medium enterprises that make up the bulk of Philippine businesses.

"We are actively fostering a business-friendly environment that drives innovation, generates quality jobs and enhances the local and global competitiveness of Philippine products and services," she said.

'Numbers to pick up'

Albay 2nd District Rep. Joey Salceda, an economist, said he expected GDP growth to improve in the April-June period despite lingering drag from an election spending ban.

"I expect the numbers to pick up in the second quarter, especially capital formation, as expectations of Trump's tariff regime become more stable," he said.

"Businesses also put some of their plans on hold due to uncertainty over the world trade system."

Salceda said that he would ask President Ferdinand Marcos Jr. to implement measures that would "make exportation easier and cheaper; faster processing times for licenses, permits and rules of origin documents for our trade; and easier availment of existing tax incentives."

Source: Manila Times