THE PHILIPPINE ECONOMY likely expanded within the second quarter due to cooling inflation, election-related spending, and faster exports, analysts said.
Nevertheless, uncertainty over US tariffs can have tempered economic momentum within the April-to-June period, they added.
Gross domestic product (GDP) likely grew 5.5% within the second quarter, in response to a median forecast of 17 economists polled by BusinessWorld.
If realized, this may be a tad faster than the 5.4% growth recorded in the primary quarter. Nevertheless, it could be slower than the 6.5% expansion within the second quarter last 12 months.
This might place average growth at 5.5% for the primary half, aligning with the lower end of the federal government’s revised 5.5-6.5% goal range.
The Philippine Statistics Authority (PSA) is scheduled to report second-quarter GDP data on Aug. 7.
“Household consumption, the country’s essential growth engine, likely strengthened on the back of low and stable inflation, regular remittances, and robust labor market conditions,” Chinabank Research said.
In June, headline inflation ticked up 1.4%, a tad faster than the 1.3% in May but still slower than 3.7% in June 2024, official government data showed. June marked the fourth straight month that inflation was below the central’s bank’s 2-4% goal for the 12 months.
Inflation averaged 1.8% in the primary half, decelerating from 3.6% a 12 months ago.
Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said household consumption likely remained the essential growth driver within the second quarter, supported by election-related spending, easing inflation, and continued strength in consumer lending.
“While disinflation has helped ease cost pressures and support consumption, overall domestic demand stays cautious on account of weak consumer and business sentiment, limited fiscal impulse through the election period, and muted employment quality,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said.
Nevertheless, the Commission on Elections’ 45-day ban on public works spending, which began on March 28 and ended with the May 12 elections, can have dampened government spending.
“For probably the most part, domestic demand lost some steam within the quarter that has just passed by, particularly government spending, which was to be expected given the natural lull in such expenditure during an election season,” Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said.
Philippine National Bank economist Alvin Joseph A. Arogo said GDP growth likely slowed within the second quarter on account of “tapering of presidency spending, weak business sentiment on account of trade uncertainty.”
NARROWER TRADE GAP
“A narrower goods trade deficit, driven partly by frontloading from US importers ahead of the imposition of upper US tariffs and by growing demand for Philippine products in other export markets, also likely contributed to the upside,” Chinabank Research said.
In April, US President Donald J. Trump announced a 17% reciprocal tariff rate for goods from the Philippines, however the implementation was suspended until July.
Mr. Trump threatened to lift the tariff to twenty% in early July, but eventually set a 19% tariff on Philippine goods after a gathering with Philippine President Ferdinand R. Marcos, Jr. The brand new tariff rate is predicted take effect on Aug. 7.
Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said the narrower trade deficit in June can have been driven by US firms frontloading imports before the US tariffs took effect.
“The postponement of those tariffs gave room for firms to order more from [Philippine] exporters before they take effect,” Mr. Erece said.
The Philippines’ trade-in-goods deficit narrowed to $3.95 billion in June, as exports jumped by 26.1% to $7.02 billion, driven by frontloading within the run-up to higher US tariffs.
In June, the USA was the highest destination for Philippine-made goods with $1.22 billion, accounting for 17.3% of total exports.
“Uncertainty over US tariff rates and the continued price correction within the Philippines’ real estate market also likely took a toll on the expansion plans of firms and businesses,” HSBC Global Research economist for ASEAN Aris Dacanay said.
Mr. Asuncion said selective export strength, particularly electronics and mineral products, “provided some lift.”
“But global uncertainties and the delayed US Fed easing following a stronger-than-expected US inflation report proceed to weigh on investor confidence and trade dynamics,” he said.
WEATHER DISRUPTION
Marites M. Tiongco, professor and dean of the School of Economics on the De La Salle University, said that the modest growth within the second quarter would fall in need of earlier expectations as weather disruptions affected the agriculture sector.
“The projected 5.5% GDP growth within the second quarter of 2025 is attributed to the continued strength of domestic demand and public sector infrastructure spending but moderated by the negative impact of back-to-back typhoons on the agriculture sector and rural consumption,” she said.
Ms. Tiongco said the agriculture sector was “a key drag” on GDP growth within the second quarter.
“Unlike the anticipated dry-season El Niño impact, second-quarter 2025 was as an alternative defined by typhoon-related damages that reduced yields in rice, corn, and fisheries. These disruptions had a twofold effect: first, by directly lowering agricultural value-added, and second, by not directly constraining rural household spending and transport flows,” she said.
Agriculture accounts for a couple of tenth of gross domestic product and a couple of quarter of all jobs. The PSA will release second-quarter agriculture and fishery production data on Aug. 6.
Ms. Tiongco said the Philippine economy is on the right track to grow between 5.5% and 5.8% in 2025.
“(The economy’s) resilience rests on domestic consumption, strong infrastructure investment, and stable remittances. Nevertheless, external fragilities — particularly from shifting US trade policy and geopolitical dynamics — pose downside risks, underscoring the necessity for proactive trade diplomacy, resilient supply-chain strategy, and climate-adaptive investments,” she said.
Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said he expects full-year economic growth at 5.6%.
“For the rest of the 12 months, I expect GDP growth to be at sub-6%, i.e., at 5.8% within the second half of the 12 months,” he said.
GlobalSource Partners Country Analyst Diwa C. Guinigundo said the lower end of the federal government’s goal could also be achievable this 12 months amid “greater uncertainties” on account of geopolitical tensions and US tariffs within the second half.
“The Philippine economy for the remainder of the 12 months could also be more difficult because by then the impact of upper tariff within the US might need kicked in, each by way of moderating exports and overall economic growth,” Mr. Guinigundo said.
Chinabank Research said it expects domestic economic conditions to stay favorable for growth for the remainder of the 12 months.
“Nevertheless, the local economy would likely proceed to contend with external headwinds, including elevated uncertainty, steep US tariffs, and a possible slowdown in global economic activities,” it said. — L.P.Q.Batoon