Economic growth cools to near five-year low in Q4

Economy registers weakest growth since 2020 in 2025: GDP increased 3.0% in annual terms in Q4, following Q3’s downwardly revised 3.9% growth. Q4's reading was the weakest since Q1 2021 and came in below market expectations of a milder deceleration. In seasonally adjusted quarter-on-quarter terms, the economy grew 0.6% in Q4 (Q3: +0.3% qoq s.a.). In 2025 as a whole, GDP growth cooled to 4.4% from 2024’s 5.7%, marking the softest rise since the pandemic-induced downturn in 2020.

Corruption scandal continues to drag on growth: Relative to the previous quarter's data, figures in Q4 worsened for private consumption (+3.8% in annual terms vs +4.1% in Q3), government consumption (+3.7% vs +5.8% in Q3) and fixed investment (-7.2% vs +0.5% in Q3). In contrast, readings strengthened for exports of goods and services (+13.2% vs +7.4% in Q3) and imports of goods and services (+3.5% vs +3.2% in Q3). The contribution of net trade to GDP growth more than doubled from Q3 in Q4. The ongoing corruption scandal linked to the misappropriation of public funds in flood-control projects continued to weigh on domestic demand. In particular, fiscal tightening in light of the scandal depressed public construction by more than during the pandemic, curbing fixed investment in turn. Moreover, consumer confidence was the weakest in four years in Q4, resulting in softer private spending growth.

Public spending and exports to weigh on GDP growth ahead: Following almost a full percentage point of forecast downgrades since February 2025, our panelists now see GDP growth near the bottom of the government’s 5.0–6.0% target in 2026. Growth in public spending should roughly halve from 2025 amid the ongoing corruption scandal, and exports should decelerate tangibly compared to last year due to higher U.S. import tariffs. Still, lower interest rates should provide tailwinds to private spending and fixed investment.

Panelist insight: United Overseas Bank’s Julia Goh and Loke Siew Ting said: “We maintain our expectation of a modest growth recovery in 2026, supported by the Philippines’ ASEAN chairmanship, a more accommodative monetary policy stance, manageable inflation, greater clarity on global trade dynamics, and the ongoing AI upcycle. Nonetheless, restoring integrity and momentum in the national infrastructure programme remains critical to safeguarding the growth outlook amid lingering external uncertainties. Nomura’s Euben Paracuelles and Yiru Chen commented: “Based on our scenario analysis, the unintended fiscal tightening will likely persist for another 1-2 quarters. In addition to the anti-corruption clampdown, which implies continued caution in government spending, we believe pre-procurement activity did not take place late last year, delaying the implementation of projects even further. Over the same period, we continue to expect negative spillover effects – already evident in household consumption – to broaden further to private investment spending owing to the impact of the scandal on sentiment and the slump in construction activity.”

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