Spending slump likely dragged 2025 GDP growth to 4.7%

Slow government spending amid the flood control graft mess may have led the Philippines to miss its growth target for a third straight year in 2025, according to analysts.

In a report dated Jan. 23, Nomura Global Markets Research economist for China Harrington Zhang said the fourth-quarter gross domestic product (GDP) likely expanded by 3.8%, bringing full-year growth to 4.7%.

“We expect GDP growth to decline further to 3.8% year on year in Q4 from 4% in Q3, reflecting the impact of the sharp fiscal contraction, which has persisted as a result of the ongoing corruption scandal,” Mr. Zhang said.

In the third quarter of 2025, the country’s GDP expanded by 4% — its weakest in over four years — as allegations of corruption among public officials and private contractors behind the country’s flood control projects dampened government spending and household consumption. This brought GDP growth to 5% as of September.

In a separate report, Deutsche Bank economists said that they see the Philippine economy posting a 4.1% growth in the fourth quarter, with the full-year print settling at 4.7%.

If realized, fourth-quarter growth would have slowed from 5.3% in the same quarter in 2024. Full-year GDP growth would have also slowed from 5.7% in 2024.

On the other hand, climate shocks may have also contributed to fourth-quarter growth, which DBS Senior Economist for Eurozone, India, Indonesia Radhika Rao and Global Chief Economist Taimur Baig expect to end at 4.2%. DBS expects 2025 GDP growth to settle at 4.8%.

A BusinessWorld poll of 18 economists last week yielded a 4.2% median estimate for fourth-quarter GDP growth, and 4.8% for 2025.

This also means 2025 could also mark the third year in a row that the government failed to reach its growth goal. The Development Budget Coordination Committee had set a 5.5%-6.5% target for last year.

Nomura and Deutsche Bank’s full-year forecasts are also below the Department of Economy, Planning, and Development’s 4.8%-5% estimate, but are slightly above the Bangko Sentral ng Pilipinas’ (BSP) 4.6% projection.

“Philippines’ Q4 2025 GDP growth is likely to come in at 4.1% YoY (year on year), thus bringing 2025 growth to 4.7%, which outside of the pandemic would be the lowest full-year growth since 2011,” Deutsche Bank said. “Similar to Q3, we expect reduced government outlays, with the associated spillover effects to private investment and spending, to drag on growth.”

Nomura’s Mr. Zhang said the scandal may have continued to hit household consumption and private investments in the last quarter of the year.

“We also expect the negative spillover effects from the scandal to broaden from household consumption to private investment spending, likely due to a prolonged slump in construction activity and the drop in overall business sentiment,” he said.

Deutsche Bank also noted that consumers turned more pessimistic in the fourth quarter, prompting more households to save rather than splurge on costly items.

“This would likely materialize as lower growth in the near term, as household consumption comprises more than 70% of GDP in the Philippines,” it added.

The BSP’s latest Consumer Expectations Survey showed that the consumer confidence index worsened to -22.2% in the fourth quarter from -9.8% in the third quarter.

This was the weakest consumer sentiment logged since late 2021 or during the COVID-19 pandemic.

The Philippine Statistics Authority is set to release the fourth-quarter and full-year 2025 GDP report on Thursday, Jan. 29. — Katherine K. Chan