PH economy likely grew by just 4% in Q4 2025, says HSBC
The fiscal drag from tighter scrutiny on public spending is likely to persist over the next few years, with a sharp pullback in infrastructure outlays putting fourth-quarter 2025 economic growth at risk of slipping below 4 percent.
This is according to Aris Dacanay, economist at HSBC Global Investment Research, who is forecasting a fourth-quarter growth of 4 percent, bringing full-year 2025 growth to 4.7 percent. This is below the Marcos administration’s 4.8 to 5 percent recent forecast and well under the 5.5 to 6.5 percent target for the year.
If realized, this would mark the weakest growth in four years, matching the 4 percent recorded in the third quarter on the back of government infrastructure spending contracting sharply.
The much-awaited fourth-quarter growth print, which will determine the overall performance of the economy in 2025, is scheduled for release on Jan. 29.
”I think the fiscal drag will likely persist throughout the next two to four years because I think the process of improving due diligence and being able to scrutinize which projects are worth going for and which projects are not, is a process that does not happen overnight,” Dacanay said.
Infrastructure spending already showed signs of strain at the start of the fourth quarter, plunging 40.1 percent in October to P65.9 billion. The Department of Budget and Management (DBM) has warned that weaker infrastructure disbursements are expected to persist through the rest of the quarter.
Should infrastructure spending continue to decline by around 40 percent in November and December, Dacanay said fourth-quarter growth could even fall below 4 percent.
“I do have an elasticity that for every 10-percent drop in public infrastructure spending leads to a reduction of 0.5 percentage points in the growth rate,” he explained.
Dacanay drew parallels with the 2013 pork barrel scam, in which around P10 billion had been siphoned off from public funds, leading to years of underspending. During that period, Dacanay said the government had only spent around 85 to 92 percent than originally planned.
Data from the DBM showed an annual underspending rate of 13.3 percent in 2014 and 12.8 percent in 2015, before being cut to 2.9 percent in 2017.
By comparison, the flood control corruption scandal has hundreds of billions of pesos at stake, far larger than the pork barrel scam.
“I think the government will have a difficult time spending its budget for 2026. I think similar to 2013 to 2016, the government will have it due to institutional reform and higher scrutiny of public spending,” Dacanay said.
