PH GDP growth seen rebounding in Q4 2025
The Philippines’ economic growth is expected to post a modest recovery in the final quarter of 2025, fueled by holiday spending, but it is unlikely to return to a 5 percent pace as a widening graft probe disrupts government spending.
In their latest “The Market Call” report, economists at the University of Asia and the Pacific (UA&P) said growth in the fourth quarter may hit 4.6 percent, which would mark a recovery from the four-year low clip of 4 percent in the preceding three months.
Explaining their outlook, the economists said the typical surge in consumption during the holiday season could help lift the economy—where household spending historically accounts for about 70 percent of total output.
Still, the forecast suggested that the economy may post another quarter of sub-5 percent growth. It would also make the Marcos’ administration’s 6.5- to 7.5-percent growth target for the whole 2025 unachievable.
“Low inflation, higher OFW remittances (especially in peso terms) and exports, lower interest rates and return to positive year-on-year growth in government spending should see consumers open their bank accounts and e-wallets more generously than in the third quarter,” the UA&P economists said.
President Marcos’ economic team earlier signaled that official macro targets may need to be revised to account for the fallout from an escalating antigraft drive.
The probe has widened to include lawmakers, Cabinet members, government engineers and private contractors, hitting confidence and squeezing public spending at a time when the economy is counting on domestic demand to cushion against mounting global risks.
To “compensate” for the effects of the graft fallout, the Bangko Sentral ng Pilipinas (BSP) slashed the overnight borrowing rate, guiding bank lending costs by another quarter point to 4.5 percent at its final policy meeting for the year. Governor Eli Remolona Jr. said any further rate easing next year—if they come at all—is likely to be limited to a single 0.25 percentage point reduction.
In a note to clients, analysts at Nomura struck a more dovish tone, saying they expect the central bank to deliver another 50 basis points of rate cuts over the next two Monetary Board meetings in the first half of 2026, bringing the benchmark rate down to 4 percent.
“Our forecast is underpinned by our more cautious view on the growth outlook, which is the overriding policy consideration for BSP, in our view, with inflation remaining benign,” they said.
“The output gap has widened sharply as a result of the sharp fiscal tightening due to the corruption scandal, adding to subdued demand-side price pressures,” they added.
Looking ahead, the UA&P economists said the central bank’s rate cuts could boost investor appetite for peso-denominated government bonds.
But they maintained their “constructive” outlook for local equities, though they expected the double rate cuts from the BSP and US Federal Reserve, S&P’s investment grade affirmation and the holiday remittance wave to lift the main index to the 6,000 to 6,200 range in the short run.
“Judicial action on the flood control scandal is proceeding, which could lift sentiment some more if big names get arrested,” the economists said.
