By Isa Jane D. Acabal, Researcher
THE PHILIPPINE ECONOMY likely expanded at a slower pace within the fourth quarter of 2025, bringing full-year growth below the federal government’s goal amid a corruption scandal, analysts said.
Gross domestic product (GDP) could have grown by an annual 4.2% from October to December, in keeping with a median forecast of 18 economists polled by BusinessWorld.
If realized, the expansion is far slower than the 5.3% expansion in the identical period in 2024. Quarter on quarter, GDP growth picked up from the over four-year low of 4% within the third quarter.
This may put the full-year 2025 median estimate growth at 4.8%, missing the Development Budget Coordination Committee’s 5.5%-6.5% growth goal.
If realized, this may be slower than the 5.7% expansion in 2024 and the weakest for the reason that 9.5% contraction posted in 2020.
The complete-year GDP estimate can be below the forecasts of the Asian Development Bank (5%), World Bank (5.1%), International Monetary Fund (5.1%), and the ASEAN+3 Macroeconomic Office (5.2%).
The Philippine Statistics Authority (PSA) will release the fourth-quarter and full-year 2025 GDP data on Thursday, Jan. 29.
Harumi Taguchi, principal economist at S&P Global Market Intelligence, said weak government spending is the important factor that constrained growth within the fourth quarter and full yr.
“We anticipate weak government spending and public fixed investment, reflecting the impact of ongoing corruption issues,” she said in an e-mail.
A large-scale controversy linking Public Works officials, lawmakers and personal contractors to multibillion-peso corruption in anomalous flood control projects dragged government spending and household consumption. The Independent Commission for Infrastructure (ICI) has been investigating these allegations.
Government spending fell for a fourth straight month in November to P498.31 billion, down by 9.6% yr on yr.
“On government spending, we’ll probably see more of the particular short-term damage caused not directly by the ICI’s formation and investigations, which only really kicked off at the top of Q3. (Fourth quarter), subsequently, should feel the brunt of this natural lull and hesitancy on the a part of each private and non-private developers,” Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said.
Ruben Carlo O. Asuncion, chief economist on the Union Bank of the Philippines, said the slower annual GDP growth reflected the impact of the corruption scandal.
“The weakness reflects the broad fallout from the flood control corruption probe, which dampened public construction, delayed fiscal disbursements, and weighed heavily on consumer and business sentiment through the top of the yr,” he said. “High‑frequency indicators also showed sluggish household spending and soft labor‑market conditions as unemployment ticked up and job creation stalled.”
Patrick M. Ella, an economist at Sun Life Investment Management and Trust Corp., said the decline in consumer and investor confidence following the graft scandal “has translated to slow consumption and a contraction in private investments.”
“The decline in government spending following heightened disbursement scrutiny hit the economy hard within the yr. The impact of presidency spending multipliers declined, reducing aggregate demand and hurting economic growth,” Marco Antonio C. Agonia, an economist on the University of Asia and the Pacific (UA&P), said.
Other than weak government spending, natural disasters hampered infrastructure development and economic activity, in keeping with Angelo B. Taningco, chief economist at Security Bank Corp.
In 2025, a complete of 23 tropical cyclones entered the Philippine Area of Responsibility, as recorded by the state weather bureau.
Ms. Taguchi said natural disasters have also negatively affected agricultural production, disrupted supply chains and weighed on production, tourism, and retail sales.
“Private consumption and personal investment are projected to see moderate growth, tempered by opposed weather conditions within the fourth quarter of 2025,” she added.
RATE CUTS
Maybank Investment Bank economist Azril Rosli said GDP growth was mainly because of “resilient” private consumption backed by easing inflation, rate cuts by the Bangko Sentral ng Pilipinas (BSP), and the “modest” recovery in net exports.
Inflation quickened to 1.8% in December from 1.5% in November, bringing average inflation for full-year 2025 at 1.7% — the slowest pace in nine years.
“The slowdown in inflation over the past few months was a results of favorable base effects and the sustained decline in rice and energy prices throughout the period,” Nicholas Antonio T. Mapa, chief economist on the Metropolitan Bank & Trust Co., said in an e-mail.
“The short step to a more accommodative monetary stance likely helped jumpstart flagging investment momentum,” he added.
The BSP has reduced key borrowing costs by a complete of 125 basis points in 2025, bringing the important thing policy rate to an over three-year low of 4.5%.
“The BSP’s rate of interest cuts to date have yet to have a meaningful impact on economic growth, and it shows how weak 2025 was overall. The transmission of rate cuts to stronger activity in the actual economy is of course quite long for emerging markets similar to the Philippines, one thing that the BSP is well aware of,” Pantheon Macroeconomics’ Mr. Chanco said.
UA&P’s Mr. Agonia said rate cuts’ impact on the actual economy is minimal within the short term as monetary policy actions have a one-and-a-half to two-year lag.
“Rate cuts done in 2025 will likely provide palpable boosts to economic performance only by the second half of 2026 and into 2027,” he added.
At the identical time, stronger exports and a narrower trade deficit likely drove GDP growth amid “robust external demand for semiconductors and ongoing diversification efforts amid protectionist policies within the [United States],” Chinabank Research said.
Preliminary data from the PSA showed the country’s balance of trade in goods — the difference between exports and imports — narrowed to $3.51 billion yr on yr in November from a $4.19-billion deficit in October.
Exports rose by 21.3% to $6.91 billion in November, faster than the 20.3% growth registered in October. This was mainly driven by the 50.6% increase in electronic products to $4.19 billion.
“Moderate global growth limited our projected export growth in 2025, although the impact of US tariff increases has been milder than anticipated,” S&P Global’s Ms. Taguchi said.
RECOVERY IN 2026?
This yr, economists anticipate a gradual recovery in GDP growth as the federal government implements catch-up spending.
“To lift growth in 2026, policy focus should shift toward stronger fiscal execution, accelerated infrastructure and energy investments, enhanced disaster resilience, and deeper structural reforms to crowd in private investment and improve export competitiveness,” Maybank’s Mr. Rosli said.
“Monetary easing alone is unlikely to deliver a meaningful growth acceleration without these complementary measures,” he added.
Rizal Business Banking Corp. Chief Economist Michael Ricafort said the federal government’s catch-up spending plans and other anti-corruption efforts are expected to spice up growth in the primary quarter.
“If anti-corruption measures and other related priority reforms that further level up governance standards can be taken seriously, these can be the missing and remaining necessary catalyst that will help improve investor confidence,” Mr. Ricafort said.
Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the economic growth can pick as much as 5.6% in 2026 “if the federal government focuses on clean and timely spending, stronger infrastructure delivery, more predictable policy signals, and real support for agriculture and small businesses.”
Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. said the economy might see higher numbers within the second half of 2026 if there are fewer natural disasters.
“It was disappointing, after all, as our potential growth is closer to six% to eight%. Improving the standard of public spending by banning all types of conflict-of-interest is what’s needed to get the economy back to its full potential,” Mr. Neri said.
Economic managers expect GDP to grow by 5-6% this yr.