Economic growth decelerates in Q3

Graft scandal and super typhoon dampen economic momentum: The Philippines' GDP grew 4.0% in annual terms in Q3, following 5.5% growth in the prior quarter. The reading missed market expectations of a softer moderation in growth and marked the weakest figure since Q1 2021, when the economy was still in the grip of the Covid-19 pandemic. Natural disasters and a corruption scandal involving public infrastructure projects weighed on activity. On a seasonally adjusted quarter-on-quarter basis, the economy grew 0.4% (Q2: +1.5% qoq s.a.).

Domestic demand fuels Q3’s deceleration: Relative to the previous quarter's data, figures in Q3 worsened for private consumption (+4.1% in annual terms vs +5.3% in Q2), government consumption (+5.8% vs +8.7% in Q2), fixed investment (+0.1% vs +3.1% in Q2) and imports of goods and services (+2.6% vs +3.5% in Q2). In contrast, the reading for exports of goods and services improved in Q3 (+7.0% vs +4.7% in Q2).

Panelist insight: Julia Goh and Loke Siew Ting from United Overseas Bank commented on the outlook: “In light of the weaker-than-expected 3Q25 GDP performance and the likelihood of a prolonged drag from governance concerns surrounding infrastructure investment and adverse weather conditions, we slash our full-year growth forecasts to 4.6% for 2025 (from 5.3%; 2024: 5.7%) and to 5.0% for 2026 (from 5.7%). Key drivers of recovery in 2026 include a more accommodative monetary policy stance, contained inflation expectations, increased fiscal spending, the Philippines’ ASEAN chairmanship, and greater clarity on global trade dynamics— all of which are expected to provide support to economic activity.”

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