By Aubrey Rose A. Inosante, Reporter
THE PHILIPPINE ECONOMY is unlikely to get the boost it needs within the fourth quarter to succeed in the low end of its full-year growth goal, as public spending and investments are expected to stay subdued amid a widening corruption scandal, analysts said.
Analysts also said it’s time for economic managers to revise their 5.5% to six.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% within the fourth quarter to register not less than 5.5% growth for the total 12 months.
“The federal 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 five.3% (from 5.7%), and for 2026 to five.6% (from 5.8%),” he told BusinessWorld in a Viber message over the weekend.
Philippine GDP expanded by 4% within the third quarter, sharply slowing from the 5.5% within the second quarter and 5.2% a 12 months 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 because the 3.8% contraction at the peak of the pandemic in the primary quarter of 2021. Excluding the pandemic, this growth was the weakest because the third quarter of 2011.
This brought the nine-month average to five%, slower than 5.9% in the identical period last 12 months.
Reinielle Matt M. Erece of Oikonomia Advisory and Research, Inc. said the economy will not be more likely to expand by 7% within 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 federal government’s 5.5% to six.5% growth goal might be “very difficult,” especially with more storms expected this quarter.
ING Bank Regional Head of Research, Asia Pacific Deepali Bhargava warned that sluggish government spending could turn into a longer-term drag on the economy, dampening each fiscal outlays, business and personal sector sentiment.
Government spending rose by 5.8% within the third quarter, slowing from the 8.7% pace within the previous quarter, but faster than the 5% growth in the identical period in 2024.
“While agriculture and personal consumption are more likely to rebound within the fourth quarter, investment and public spending may remain muted, keeping the general 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 within 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 total impact of upper 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 throughout” and warned that the worst has yet to come back.
“Looking ahead, things are more likely to worsen before they get any higher, because the anti-corruption drive in public infrastructure projects that has stymied activity only really began in the ultimate 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 tip of the tunnel” but more likely than to not bleed into the fourth quarter.
For Mr. Chanco, the one real brilliant 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 a while, nevertheless it’s clear today that we’ll still need to downgrade our already soft 5.3% and 5.4% projections for this 12 months and next, respectively,” he said.
Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in an e-mail that 4% growth within 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 necessity for stronger public investment execution and targeted support for trade-sensitive sectors,” he said in a Viber message.
Within the third quarter, household final consumption expenditure, which accounts for over 70% of the economy, grew by a slower 4.1% from 5.3% within the second quarter and 5.2% a 12 months ago.
Gross capital formation, the investment component of the economy, contracted by 2.8% versus the 12.8% growth a 12 months ago and the 1.2% expansion within the second quarter.
Capital Economics noted that the Philippines’ third-quarter performance contrasted sharply with a lot of the region — including Taiwan, South Korea, and Vietnam, where growth accelerated in the course of the period.
“Heightened uncertainty and fears of exposure may deter firms from committing to recent investment projects, while delays in public procurement will weigh further on demand,” it said, saying that weakness in activity is more 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 resembling Vietnam are growing at such a sturdy pace in comparison with us. We lack competitive industrial policy, inclusive opportunities, and most significantly, 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 within the fourth quarter, the federal government has to “fix the corruption issue and restore public trust.”
“For now, monitor fiscal policy execution closely. If spending stays subdued, private sector resilience and investment might 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 proceed its easing cycle, analysts said.
Capital Economics said in a report that the recent GDP result “confirmed” the probabilities of the BSP cutting rates at its Dec. 11 meeting.
“We proceed to expect two more 25-basis-point (bp) rate cuts this cycle (one before yearend and one other in early 2026) however 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.
Because 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 12 months to assist support domestic demand because the corruption mess dampened investor sentiment and economic prospects.
“With inflation easing and the BSP more likely to pivot to a more accommodative stance in early 2026, aside from the 25-bp cut in December,” Mr. Asuncion said.
Within the 10-month period, inflation averaged 1.7%, matching the BSP full-year forecast and still inside its 2-4% goal.
“Nevertheless, we expect growth to regain momentum, though risks from global demand and monetary constraints remain,” Mr. Asuncion said.