Underwhelming Q3 growth souring 2025 PH outlook
The Philippines’ disappointing third-quarter economic growth has prompted a wave of downward revisions to the country’s outlook, with economists now projecting average annual growth of less than 5 percent as the ripple effects of the ongoing corruption scandal weigh on other key drivers of the economy.
In a note to clients, Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics in London, described the “ugly” performance last quarter as leaving the firm no choice but to cut its already downbeat 2025 growth forecast for the Philippines to 4.9 percent, from 5.3 percent previously.
Pantheon also trimmed its 2026 outlook to 5 percent, from 5.4 percent.
Chanco warned that the economy has yet to feel the full impact of the government’s widening probe into anomalous infrastructure projects. The scandal, he noted, has not only hurt government spending but also undermined business confidence, putting a chill on investment plans.
Jumbo cut
That said, Pantheon is betting the central bank may respond with an outsized 50-basis point rate cut in December to support the economy and perk up investor sentiment, assuming inflation remains benign in November.
BMI Research, which also lowered its 2025 growth forecast to 4.9 percent from 5.2 percent, echoed the same concerns.
“The risks to our forecasts are tilted to the downside,” BMI said. “The drag on government spending from the corruption probe could last beyond Q1 2026, particularly if sectors other than flood control are implicated.”
Announcing the data last week, Economic Planning Secretary Arsenio Balisacan conceded that reaching even the low end of the government’s 5.5- to 6.5-percent growth target for 2025 has become “very challenging” after the economy expanded at a four-year low of 4 percent last quarter.
Figures showed state spending grew by 5.8 percent in the third quarter, the slowest pace since the same period in 2024, after the graft probe delayed public works as authorities grew more cautious in awarding contracts.
A notable weakness was also seen in consumer spending, which historically accounts for roughly 70 percent of total output. Despite tame inflation and declining interest rates that could have bolstered households’ purchasing power, this key segment grew just 4.1 percent—a four-year low—after a series of powerful storms disrupted the local job market.
“When both households and firms turn cautious in unison, confidence in the economic outlook clearly falters,” economists at Moody’s said in a commentary.
Euben Paracuelles and Yiru Chen, economists at Nomura, offered a more pessimistic 2025 estimate of 4.7 percent, citing “spillovers” from the graft scandal beyond public spending as well as external headwinds.
“We continue to incorporate some spillovers on other components of domestic demand, as discussed above, broadening from household consumption to private investment spending,” they said.
“Our forecasts also continue to take into account the impact of the US tariffs, which pose significant headwinds to goods exports,” they added.
