Holiday spending boost to prop up Philippine GDP growth

The Seasonal increase in household spending amid the upcoming holiday season could help propel Philippine economic growth to reach the government’s target, Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio M. Balisacan said.

Mr. Balisacan said faster growth in household final consumption, which accounts for over 70% of gross domestic product (GDP), can push economic growth to meet the 5.5% to 6.5% goal for this year.

“Household consumption should be enough because the inflation has continued to be low,” he told reporters on the sidelines of an event on Thursday.

“Interest rates are also (low), and there are lagged effects from previous interest rate (cuts). I think in general, confidence is still there for consumers and businesses.”

Mr. Balisacan said the economy must grow by 5.6% in the second half to meet the low end of the full-year target and by 7.5% to hit the upper end.

DEPDev Undersecretary Rosemarie G. Edillon also told BusinessWorld on the sidelines of a House briefing on Wednesday that the holiday-driven boost in private spending could bring GDP growth to the lower end or middle of the 5.5% to 6.5% target.

Philippine GDP grew by 5.5% in the second quarter, supported by a rebound in agriculture production and faster household spending. Household final consumption expenditure jumped by 5.5% during the period.

Economic growth averaged 5.4% in the first semester, just a tad below the 2025 goal.

Meanwhile, headline inflation averaged 1.7% in the first eight months of the year, below the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target.

Manageable inflation has allowed the BSP to continue its easing cycle, with cumulative cuts since August 2024 now at 150 basis points (bps) following its latest 25-bp reduction delivered last month.

BSP Governor Eli M. Remolona, Jr. has signaled that they are nearing the end of their rate cut cycle and could lower borrowing costs one last time this year if inflation remains low to provide support to the economy.

Mr. Balisacan flagged potential risks to economic growth, including delays in the rollout of infrastructure projects due to the ongoing probe into alleged irregularities in government flood-control contracts.

“That’s what we’re hoping — to still reach the lower end. But of course, there could be surprises, like this issue of flood control. Hopefully, that will not slow down the implementation of legitimate projects,” he said.

Budget Secretary Amenah F. Pangandaman has said that infrastructure spending, a key growth driver, is unlikely to be affected by the probe.

Foundation for Economic Freedom President Calixto V. Chikiamco said slowing inflation may provide a “marginal boost” to consumer spending, but weak global trade due to the tariffs imposed by the United States could affect supply-side drivers like exports.

He added that real interest rates are still high despite the BSP’s easing moves.

Moody’s Analytics also said in a report on Thursday that the Asia-Pacific region is expected to “feel the sting from tariffs more than others” as most countries are backed by export-led growth. “With business and consumer spending across the region tepid, there is little homemade demand to fall back on.”

“While increased consumption can help fuel GDP growth, it cannot stand alone as it must be matched by a corresponding boost in productive investments, which in turn depends on restoring investor confidence through good governance,” said John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies. “In an environment of low public trust due to corruption, achieving the upper bound of GDP growth targets will require going beyond the usual growth drivers and addressing credibility, transparency, and accountability head on.”

“Holiday spending will give GDP a lift, no doubt. But to hit the 6%, we’ll need more than Christmas cheer. We need stronger job creation, better remittance flows, and a rebound in exports. Consumption helps, but it’s not a solo act,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message. — Aubrey Rose A. Inosante, Reporter