PH 2025 growth miss ups odds of Feb rate cut
The economy’s lackluster growth in the final quarter of 2025 is bolstering expectations for another interest rate cut this year, with policymakers seen taking advantage of low inflation to front-load easing early this year.
Nicholas Mapa, chief economist at Metropolitan Bank & Trust Co., said the weaker-than-expected figure reported on Thursday should all but seal a cut at the Bangko Sentral ng Pilipinas’ (BSP) February policy meeting.
“The window for BSP to provide accommodation remains open for the time being, with monetary authorities likely opting to front-load cuts while the inflation objective is still in hand,” Mapa said.
Gross domestic product (GDP) expanded 3 percent in the fourth quarter of 2025—the slowest pace in more than 14 years and well below the median estimate of 4.2 percent in a poll of 14 economists by the Inquirer. The outturn brought full-year growth to 4.4 percent, missing the government’s 5.5 percent to 6.5 percent target and falling short of the 4.8 percent consensus forecast.
Secretary Arsenio Balisacan of the Department of Economy, Planning and Development said he had expected some softening in activity but was taken aback by how sharp the deceleration turned out to be.
Consumer spending, long the economy’s main driver, grew 5.4 percent in the final quarter, slightly slower than in the previous three months. Government spending also cooled, rising 6 percent after expanding 7.6 percent earlier. Investment, measured by gross capital formation, fell by 9 percent.
Officials and analysts pointed to a combination of climate-related disruptions and the Marcos administration’s sweeping anticorruption campaign, which has stalled public works projects and weighed on business and consumer confidence. The scandal, they added, has also underscored how entrenched graft has weakened the country’s efforts to adapt to climate shocks.
Price stability
Earlier, BSP Governor Eli Remolona Jr. said the fourth-quarter growth figures would help inform the central bank’s decision on whether further cuts to borrowing costs were needed to support the economy.
Remolona emphasized, however, that policymakers would remain guided by their primary mandate of maintaining price stability. Since beginning its easing cycle in August 2024, the BSP has lowered its benchmark policy rate by a total of two percentage points, bringing it to 4.5 percent.
Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said the latest GDP data had “reinforced” the case for a February rate cut, though he believed that a decision was far from assured.
“The BSP will still prioritize inflation,” Asuncion said, adding that officials were also likely to keep a close eye on global conditions, particularly policy moves by the US Federal Reserve.
“Philippine monetary policy is increasingly domestically driven,” he said, “but external pressures still matter.”
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