Hitting GDP goal may be ‘challenging’

Achieving abover-6% gross domestic product (GDP) growth for the rest of the year to meet the government’s target may be “challenging” with the global trade picture still uncertain due to the Trump administration’s evolving tariff policies, analysts said. 

“It will certainly be challenging to achieve a 6.2% growth rate for the rest of the year, but it is still possible,” Ateneo School of Government Dean and Economics Professor Philip Arnold P. Tuaño said in an e-mail over the weekend. “Some of the downside risks for the Philippine economy remain the continued high levels of US tariffs, global political and security uncertainties especially in Europe and the Middle East which affect global demand for goods, and climate related shocks.”

“US President Donald J. Trump’s reciprocal tariffs, trade wars, and other protectionist policies could still slow down global trade, investments, employment, and overall world economic growth that could slow down, indirectly, Philippine GDP growth,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message, but likewise added that the growth goal remains achievable.

The Philippine economy expanded by 5.4% in the first quarter, slightly faster than the 5.3% growth in the prior three-month period but slower than the 5.9% pace in the same quarter last year, the government reported last week.

This was well below the government’s 6-8% growth target band for the year.

The weak growth came as gross capital formation growth was dampened by businesses’ anticipation of global trade uncertainties.

Since Mr. Trump was inaugurated in January, he has launched a series of protectionist policies, with one of them hiking import tariffs imposed on its major trading partners, including the Philippines. Countries are now negotiating with the US regarding the higher “reciprocal” tariffs, which have been suspended until July.

Department of Economy, Planning, and Development Undersecretary Rosemarie G. Edillon said that GDP needs to expand by at least 6.2% in the remaining three quarters to reach 6% growth — the low end of the government’s target — by yearend.

Mr. Tuaño said Philippine economic growth could be lifted by stronger government spending in the coming months as the lifting of the election ban on public works would allow for the resumption of suspended state infrastructure projects.

In the first quarter, government spending jumped by 18.7% as agencies front-loaded public projects ahead of the ban that started on March 28.

An expected rebound in exports once the Trump administration concludes its tariff negotiations with its trading partners could also provide a boost as this could lead to a recovery in electronics demand, he said.

Both Mr. Tuaño and Mr. Ricafort said that easing inflation may help drive consumption to support the economy.

“While consumption growth in the first quarter of 2025 was at 5.3%, there are certain factors that are necessary to happen to ensure higher consumption growth in the coming quarters, including the sustained decline in inflation rates, lower interest rates and the continued growth in remittances,” Mr. Tuaño said.

“Government can support this by strengthening social protection and also increasing investments especially in the rural areas in order to ensure food supply and countryside incomes,” he said.

Mr. Ricafort added that the soft GDP growth in the first quarter and benign inflation would allow the Bangko Sentral ng Pilipinas (BSP) to cut benchmark rates further, which would support the economy.

The Monetary Board resumed its easing cycle last month with a 25-basis-point (bp) cut, bringing the policy rate to 5.5%.

BSP Governor Eli M. Remolona, Jr. told Bloomberg last week that they are open to cutting rates by 75 bps more this year amid cooling inflation.

Budget Secretary and Development Budget Coordination Committee Chairperson Amenah F. Pangandaman on Friday said they remain hopeful that GDP growth could meet the 6-8% target this year.

“We still expect GDP to accelerate throughout the year as domestic demand strengthens, and public investments are sustained. This is even amidst global uncertainty, as domestic growth prospects supported by improving private consumption, including government infrastructure spending, provide a buffer against external headwinds,” Ms. Pangandaman said.

“We remain optimistic that the Philippines will meet its growth target for 2025 of 6-8%, especially as the government remains strongly committed to achieving our medium-term plans and long-term vision. Given the substantial 8.2% growth registered by the capital spending of the government — a testament to the successful implementation of public infrastructure projects — we are certain we can sustain our high-growth trajectory.”

‘Lower growth path’

Meanwhile, IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa was less positive.

“Hoping for a 6.2% growth rate in the remaining quarters of the year is overly optimistic and structurally blind to global and domestic realities,” Mr. Africa said in a Viber message over the weekend.

“The government mostly fails to achieve even the low end of its growth targets and has only been able to squeeze into its target ranges of GDP growth twice in the last decade. The government is still refusing to accept that the economy has shifted to a lower growth path from the average 6.4% growth in the 2010-2019 decade before the pandemic to just 5.6% in 2023-2024, considering the 2020-2022 years of lockdown and rebound as an aberration,” he added.

Mr. Africa warned that growth will continue to shift lower amid global disruptions and “persistent domestic structural economic weaknesses,” noting that both household and investment spending have remained low compared to pre-pandemic levels.

“Achieving 6.2% growth in the next quarters is not impossible but will require bold policies and structural transformation, not just optimism from mere statistical computations. Economic policies have to be redirected toward boosting domestic demand such as with real wage and income growth, more equity and redistribution, and expanded public services. Over the long term, stronger agricultural and Filipino industrial capacity is needed so that the growth achieved is not fragile, exclusionary and unsustainable,” he said. – Aubrey Rose A. Inosante, Reporter