The Philippines could miss its growth target for the third consecutive year in 2025 due to slow government spending amid flood control corruption, according to analysts.
In a Jan. 23 report, Nomura Global Markets Research economist Harrington Zhang on China said gross domestic product (GDP) was likely to expand 3.8% in the fourth quarter, bringing full-year growth to 4.7%.
“We expect GDP growth to slow to 3.8% in Q4, from 4% in the third quarter, reflecting the impact of the sharp fiscal contraction that continues as a result of the ongoing corruption scandal,” Mr Zhang said.
In the third quarter of 2025, the country's GDP grew by 4% – its weakest in four years – as allegations of corruption among public officials and private contractors behind the country's flood control projects reduced government spending and household consumption. This brought the GDP growth rate to 5% till September.
In a separate report, Deutsche Bank economists said they think the Philippine economy will post 4.1% growth in the fourth quarter, with the full-year print remaining steady at 4.7%.
If realized, fourth-quarter growth would have slowed from 5.3% in the same quarter of 2024. There will be GDP growth for the whole year Growth also slowed to 5.7% in 2024.
On the other hand, climate-related shocks have also contributed to fourth-quarter growth, which is expected to end at 4.2%, said Radhika Rao, DBS senior economist for eurozone, India, Indonesia and global chief economist Taimur Baig. DBS expects GDP growth to be 4.8% in 2025.
A businessworld A survey of 18 economists last week gave an average forecast of 4.2% for fourth-quarter GDP growth and 4.8% for 2025.
It also means that 2025 could be the third consecutive year that the government fails to reach its growth targets. The Development Budget Coordination Committee had set a target of 5.5%-6.5% for the 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 slightly above the Bangko Sentral ng Pilipinas (BSP)'s 4.6% estimate.
“The Philippines' fourth-quarter GDP growth is expected to be 4.1% year-on-year, bringing 2025 growth to 4.7%, which would be the lowest full-year growth since 2011 outside of the pandemic,” Deutsche Bank said. “Similar to the third quarter, we expect a decline in government outlays, with its impact on private investment and spending weighing on growth.”
Nomura's Mr. Zhang said the scandal would continue to hit household consumption and private investment in the last quarter of the year.
“We also expect the negative impact of this scandal to extend from household consumption to private investment spending, potentially leading to a prolonged decline in construction activity and a deterioration in overall business sentiment,” he said.
Deutsche Bank also noted that consumers became more pessimistic in the fourth quarter, prompting more households to save rather than spend on expensive items.
“This will likely result in lower growth in the near term, as domestic consumption accounts for more than 70% of GDP in the Philippines,” it added.
The latest consumer expectations survey from BSP showed that the consumer confidence index declined from -9.8% in the third quarter to -22.2% in the fourth quarter.
This was the weakest consumer sentiment recorded at the end of 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, January 29. Katherine K. chan