Economy tanks, slowest in 5 years

It’s scraping bottom for the Philippine economy, but Cabinet officials in and out of Malacañang are still hopeful that the country a high middle-income status before the year ends.

In 2025, the economy expanded by 4.4%, much weaker than the 5.7% growth in 2024.

This was the weakest notch in five years or when GDP declined by 9.5% in 2020. Excluding the pandemic, it was the slowest growth since the 3.9% expansion in 2011.

Since the Covid-19 pandemic is an extraordinary event, it is safe to reckon that the nation’s economy has been treading water for the last 14 years.

The Philippine Statistics Authority (PSA) reported on Thursday that the fourth-quarter gross domestic product (GDP) expanded by 3%, from 5.3% in the fourth quarter of 2024 and the revised 3.9% print in the third quarter of 2025.

It noted that economic growth sharply slowed to a post-pandemic low in the fourth quarter of 2025 as government spending, investments and consumer spending were all hampered by the tightening of government spending due to the public works scandal involving flood control irregularities.

The nation’s full-year expansion target was not reached for the third straight year.

Despite the traditional Christmas season spending in the fourth quarter of the year, last year’s holiday season was the weakest fourth-quarter performance in five years or since the 8.2% contraction in the fourth quarter of 2020.

If the pandemic period is excluded, it was the worst quarterly growth rate in 16 years or since the  1.8% in the fourth quarter of 2009, but matched the 3% in the third quarter of 2011.

On a seasonally adjusted quarter-on-quarter basis, the economy grew by 0.6%.

The full-year average also fell below the Development Budget Coordination Committee’s (DBCC) 5.5%-6.5% goal.

The latest growth likewise turned out weaker than market expectations.

Economy Secretary Arsenio M. Balisacan said the slower growth reflected the impact of adverse weather on economic activity and the corruption scandal on consumer and investor sentiment.

“Admittedly, the flood control corruption scandal also weighed on business and consumer confidence. These challenges unfolded alongside lingering global economic uncertainties,” he said.

Balisacan, earlier expected full-year growth to come in at 4.8-5%, said he did not expect such a “sharp” slowdown. However, he said economic managers had expected there would be consequences for the reforms that were put in place in the aftermath of the graft scandal.

“It cannot be business as usual. Because otherwise, we may have growth this year, or last year, growth may be higher, but with corruption all over the place, or in infrastructure. That (growth) would not be expected to last. We would better have a slowdown, correct the problems, and build the trust of our people in the government,” Balisacan said.
In the fourth quarter, household consumption, which accounts for over 70% of the country’s GDP, rose by 3.8%, slowing from 4.7% a year ago and 4.1% in the third quarter. This was the slowest household spending growth since the -4.8% seen in the first quarter of 2021.

For the full-year, consumption growth slowed to 4.6% from 4.9% in 2024.

Meanwhile, government spending grew by 3.7% in the fourth quarter, weakening from 9% in the same period in 2024 and 5.8% in the third quarter. It was also the slowest since 2.6% in the first quarter of 2024.

Of the total, state expenditures in construction declined by 41.9% during the last three months of 2025, as the government increased scrutiny over infrastructure projects.

In 2025, government spending grew by 9.1%, faster than 7.3% in the previous year.

Meanwhile, Balisacan said the country’s chances for an early rebound might now be lower.

“(W)e see 2026 as a rally point for us,” he said. “And with all these developments taking place and our chairmanship of the ASEAN (Association of Southeast Asian Nations), it should be able to turn the corners around and get the economy back on its track as early as the… second quarter of this year.”

He noted that the lingering effects of the corruption mess and the delayed approval of the 2026 budget could prevent the economy from recovering in the first quarter of the year.

“We don’t expect that growth will recover to its peak in the first quarter because we expect some still lingering effects of those measures, especially that the budget for this year was released or was approved late,” he said.