Economic growth in 2025 slowest in 14 years, data shows

The Role of Economic Growth in 2025 Slowest in 14 Years, Data Shows

Recent data released by the Philippine Statistic Authority reveals that the country's economy grew at its slowest non-pandemic pace in 14 years, with a full-year figure of 4.4 percent. This development is well below the June projection of 5.5 to 6.5 percent, which was already revised downward due to United States tariffs and global uncertainties.

GDP Expansion Slows Down

The gross domestic product (GDP) expanded only 3 percent in the fourth quarter from a year earlier, marking the slowest pace since the first quarter of 2021. This growth rate is significantly short of the government's target of 5.5 to 6.5 percent for the year.

Household Consumption and Government Spending Ease

Household consumption grew 3.8 percent in the fourth quarter year on year, easing from 4.1 percent in the previous quarter. Government spending rose 3.7 percent, down from 5.8 percent in the previous quarter.

Gross Capital Formation Contracts

On the other hand, gross capital formation contracted 10.9 percent, a sharper decline from 2.8 percent in the third quarter.

Corruption Scandal Weighs Heavily on Growth

Economic Planning Secretary Arsenio Balisacan attributed the slow growth to a spiraling corruption probe scandal over bogus infrastructure projects, which weighed heavily on short-term growth.

Reforms Expected to Boost Growth

Balisacan predicted that reforms being enacted due to the infrastructure scandal would lead to a bounce back in 2026. He emphasized the need for improvements in governance and public services to restore public trust and boost economic growth.

Government Forecasts Higher Growth in 2026

The government is forecasting a 5 percent to 6 percent expansion in 2026, with further acceleration expected in 2027.

Capital Economics Warns of Soft Growth Ahead

London-based analysts Capital Economics warned that growth would likely remain soft, predicting interest rate cuts in the near term.

Central Bank to Consider Rate Cuts

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. stated that a weaker-than-expected fourth-quarter GDP would factor into the central bank's decision at its February 19 policy meeting.

Long-term Target Remains Unchanged

Despite the slowdown, Economic Planning Secretary Balisacan emphasized that the government's aspiration of becoming a high-income country by 2040 remains unchanged.

Conclusion

The Philippine economy's slowest non-pandemic growth in 14 years is attributed to a corruption scandal and climate-related weather woes. While reforms are expected to boost growth in 2026, analysts warn of soft growth ahead. The government forecasts higher growth in 2026, but the central bank may consider rate cuts.

Key Takeaway

The Philippine economy's slow growth in 2025 is expected to be replaced by a bounce back in 2026 due to reforms being implemented to address corruption and improve governance, according to Economic Planning Secretary Arsenio Balisacan.

Edward Lance Arellano Lorilla

CEO / Co-Founder

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