Slow PH recovery seen amid graft, climate risks
The combined effects of climate-related disruptions and a sweeping corruption scandal appear to be spilling over into other pillars of domestic growth, limiting the Philippines’ ability to significantly rebound from the recent economic fallout.
Singapore-based DBS Bank Ltd. estimated that the economy may have expanded by 4.2 percent in the fourth quarter of 2025, up from a revised 3.9 percent in the previous quarter.
Capital spending likely slowed in the second half of 2025 amid the graft fallout that gutted confidence, a trend the bank said was reflected in weaker imports.
At the same time, the country was battered by storms that have gotten more powerful through the years because of climate change, adding risks to growth.
Some support may have come from abroad, however, as exports rebounded on the back of strong semiconductor demand, driven in part by the rapid expansion of artificial intelligence technologies.
“The impact of climate shocks and corruption allegations [is expected] to spill over on to the domestic drivers,” DBS said. “Annual growth is likely to average 4.8 percent, based on our quarterly assumption.”
President Marcos ordered an investigation into anomalous flood control projects, a scandal that ensnared lawmakers, Cabinet members and government engineers.
The scandal sent consumer confidence plummeting to a pandemic-era low of -22.2 percent in the last three months of 2025, while direct government spending on infrastructure contracted by 13.7 percent in the first 10 months of last year, based on latest available data.
An Inquirer poll of 14 economists showed a GDP growth consensus estimate of 4.2 percent for the fourth quarter of 2025, indicating that average growth last year may have settled at 4.8 percent. If borne out, the figure—set to be released on Jan. 29—will fall short of the government’s 5.5-percent to 6.5-percent growth target for 2025, extending a streak of missed annual goals that began in 2023.
Separately, London-based Capital Economics said growth may have slowed to 3.5 percent in the fourth quarter of 2025, adding that timely indicators suggest that the effects of the corruption scandal continued to be felt in the final months of last year.
“The backdrop of sluggish growth and subdued inflation underpins our view that the central bank will deliver further monetary easing,” Capital Economics said.
“We forecast a further 50 basis points of rate cuts this year, to 4 percent. Our view is more dovish than the consensus.”
