By Lourdes O. Pilar, Researcher
THE Philippine economy likely lost momentum within the first quarter, weighed down by weak household purchasing power, subdued government spending, fragile business confidence, and rising global energy prices linked to the Middle East conflict, economists said.
Philippine gross domestic product (GDP) likely grew by 3.4% within the January to March period, in response to a median forecast of 21 economists and analysts polled by BusinessWorld.
If realized, this might be slower than the revised 5.4% expansion recorded in the primary quarter of 2025, and fall wanting the federal government’s 5%-6% goal for this yr.
Nonetheless, it will be a tad faster than the three% growth within the fourth quarter of 2025.
The Philippine Statistics Authority is scheduled to release first quarter GDP data on May 7.
“Household consumption [is] slated to moderate as consumers work to administer debt and cope with higher energy costs,” Nicholas Antonio T. Mapa, chief economist on the Metropolitan Bank & Trust Co., said in an e-mail.
Mr. Mapa, who sees 3.4% GDP growth for the primary quarter, said government spending can also be expected to fall short, based on the most recent disbursement figures, alongside capital formation, which continues to feel the impact of the monetary policy tightening carried out in 2022 to 2024.
“We had begun to see a modest pickup to start out the yr, but this likely faded in March attributable to the heightened risk off tone,” Mr. Mapa said, adding that tight monetary conditions proceed to weigh on growth.
Azril Rosli, an economist at Maybank Investment Bank, said he sees 4.5% GDP expansion in the primary quarter, in step with underlying domestic demand but additionally reflects pressure from rising inflation and global uncertainty.
“The estimate reflects a balance between still-resilient domestic demand supported by government spending and services activity and early headwinds from higher inflation, which is starting to erode household purchasing power. Investment stays regular but cautious, while external demand is broadly stable,” Mr. Rosli said in an e-mail.
Within the fourth quarter of 2025, household consumption, which accounts for greater than 70% of GDP, grew by 3.8% — the weakest pace because the 4.8% contraction recorded in the primary quarter of 2021.
Government final consumption expenditure, which made up 12% of the GDP, grew by 0.7% within the fourth quarter, slower than the 5.8% within the third quarter and the 9.5% expansion within the last three months of 2024.
However, the country’s gross capital formation, the investment component of the economy, fell by 9.4% within the last three months of 2025, steeper than the two% decline within the third quarter and a reversal from the 5.8% growth within the fourth quarter of 2024.
Capital outlays made up nearly 20% of the country’s GDP within the fourth quarter.
Marco Antonio C. Agonia, an economist on the University of Asia and the Pacific, said GDP likely grew by 3.1% yr on yr attributable to the “lingering impacts from the loss in confidence from the flood control scandal and mounting economic headwinds from the Middle East war.”
“National Government underspending in the primary quarter will likely dent growth performance, especially compared against last yr’s frontloaded infrastructure spending pattern. Consumer spending shall be accordingly subdued, lacking multiplier effects from government spending,” he said in an e-mail.
MIDDLE EAST IMPACT?
Domini S. Velasquez, chief economist at China Banking Corp., said that Philippine GDP growth likely expanded by 3.3% in the primary quarter, primarily attributable to the worldwide energy shock arising from conflict within the Middle East.
“On the production side, services activity slowed, particularly within the transport sector, as households and firms adjusted behavior in response to surging fuel prices. These adjustments included wider adoption of work-from-home arrangements, reduced operations amongst public utility vehicles, and flight cancellations,” she said.
The US-Israel war on Iran, which began on Feb. 28, has disrupted global oil supplies and drove crude oil prices up by around 50%.
The Philippines is a net importer of crude oil and sources most of its supply from the Middle East, the world’s biggest oil-producing region.
Philippine National Bank Economist Alvin Joseph A. Arogo said that GDP growth remained sluggish mainly attributable to the “weak consumer and business confidence attributable to the lingering impact of the corruption probe and the conflict within the Middle East.”
Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said that while he sees 3.8% GDP growth in the primary quarter, this doesn’t yet reflect the impact of the oil crisis.
“It’ll be a while before the economic indicators will ‘feel’ the energy price crisis attributable to the war within the Middle East. It actually won’t be a significant component within the Q1 GDP numbers. Nevertheless, the predominant squeeze it’s more likely to cause from Q2 and beyond is on already-subdued private consumption growth, which is just starting to point out signs of stabilizing,” he said.
FASTER INFLATION
For Patrick M. Ella, an economist at Sun Life Investment Management and Trust Corp., said inflationary pressures likely dented consumer activity.
Headline inflation accelerated to 4.1% in March. This was the quickest pace in nearly two years or because the 4.4% in July 2024, and likewise marked the primary time since then that the headline print breached the BSP’s 2%-4% goal.
For the primary three months, headline inflation averaged 2.8%.
“The jump in March inflation matters since it signals that the pass-through from the oil shock had already begun. Once fuel and freight costs rise, they begin feeding into food, transport, and other essentials, which weakens household purchasing power,” Marites M. Tiongco, professor and dean of the School of Economics on the De La Salle University, said in an e-mail.
Harumi Taguchi, principal economist at S&P Global Market Intelligence, said high inflation and weaker remittances can have kept real private consumption weak in the primary quarter and can proceed to accomplish that in the subsequent quarters.
The Philippine central bank now expects inflation to average 6.3% this yr and 4.3% next yr, each above its 4% ceiling, before returning to its tolerance range in 2028.
OUTLOOK
Meanwhile, economists expect the second quarter GDP data to reflect the total impact of the worldwide oil shock.
“I might expect Q2 growth to slow to around 3.6% to 4.2%, because that’s when households usually tend to feel the total impact of the oil shock through higher food, transport, and electricity costs. Once purchasing power weakens, consumer spending also softens, and that becomes an actual drag on growth,” Ms. Tiongco said.
Ruben Carlo O. Asuncion, chief economist on the Union Bank of the Philippines, said the expansion outlook will rely on the “persistence of oil driven inflation pressures, the pace of fiscal execution in the approaching quarters, and policy calibration.”
S&P Global’s Ms. Taguchi, expects GDP to stay weak within the second quarter.
“On condition that the main impact on the economy is attributable to price and provide shocks, it will be effective if the programs included diversification of the sources of imported oil,” she said.
For Jun Hao Ng, assistant economist at Oxford Economics, the country’s economic performance within the second quarter will likely be modest as oil prices likely remain elevated.
“We must always proceed to see strong inflation through the quarter, which can put a cap on any strong recovery that was initially expected prior to the US/Israel-Iran conflict. To keep up economic growth, the federal government is more likely to launch more targeted fuel subsidies, although fiscal constraints will limit the extent of the programs,” he said.