Philippines posts worst economic growth since 2011

January 30 ------ The Philippines economy grew at its slowest non-pandemic pace in 14 years in 2025, data showed Thursday, as it was swiped by a corruption scandal and climate change-fuelled weather woes. The 4.4 percent expansion was well below a June projection of 5.5-6.5 percent, which was already a downgrade that took into consideration the imposition of US tariffs and "global uncertainties".

The full-year figure was the worst since a 3.9 percent rate in 2011 -- though it contracted 9.5 percent in 2020 during the Covid crisis. The data also showed just 3.0 percent growth in October-December, compared with 5.3 percent the year before, marking the second straight quarter that targets have been missed.

Economic Planning Secretary Arsenio Balisacan told reporters Thursday that a spiraling scandal over bogus infrastructure projects had weighed heavily on short-term growth. "Admittedly, the flood corruption probe scandal weighed on business and consumer confidence," Balisacan said of alleged fraud that is believed to have cost taxpayers billions of dollars.

Construction spending has cratered since the scandal over bogus flood control projects erupted in July, when President Ferdinand Marcos made it the centerpiece of a speech. Scores of officials, lawmakers and construction firm owners have now been implicated. Balisacan said Thursday that even normal figures from the sector would have improved 2025's growth numbers dramatically. "If public construction (had not been) been flat, GDP for 2025 would have actually increased from 4.4 to 5.5 percent," he said of a 0.24 percent dip for the year. "Weather and climate-related disruptions" had also taken a toll, he said, with missed work days and school closures amid heatwaves and nationwide flooding contributing to depressed domestic demand.

INFRA MASTER PLANS, CLIMATE RESILIENCE

“What we are now trying to do is to improve the quality of spending, and that will particularly include infrastructure,” Balisacan said. “So we need to ensure that the infrastructure we put in place, like roads, bridges, flood controls are supported by properly prepared master plans.” When it comes to disaster preparedness, meanwhile, Balisacan said government was investing in early warning systems and improving adaptation to climate change. “We are also boosting investment in climate resilient agricultural inputs, technologies and infrastructure to raise farm productivity, ensure food security and support sustained export growth,” he said. The agriculture, forestry, and fishing sector grew by 1 percent in the last quarter of 2025. Industry shrank by 0.9 percent, while services expanded by 5.2 percent. On the demand side, meanwhile, government final consumption expenditure was at 3.7 percent, a gross capital formation contracted by 10.9 percent. Household final consumption expenditure was at 3.8 percent.

ROAD TO UPPER MIDDLE INCOME ECONOMY

Philippine economic managers have cut the country's economic growth target for 2026 to 5 to 6 percent. Still, Balisacan said the country’s goal of becoming an upper middle economy by 2024 was realizable. “But we need all this good governance and good economic management to realize that. And actually, if our investments that we are making in human capital, particular education and health and infrastructure, that can elevate that potential to even higher, 6.5 or even seven,’ he noted. “So again, our trust is to keep the fundamentals sound. We must not be distracted by noise political noises, otherwise you sacrifice those sound fundamentals for short term gains, and that's not good for long term growth.

Balisacan predicted that reforms now under way would lead to a bounce back in 2026. "The resulting measures and governance reforms are necessary to strengthen accountability, improve project quality, ensure better value for scarce public resources, and build our capacity for faster and more sustainable growth in the years ahead," Balisacan said. But London-based analysts Capital Economics, noting a 18.4 percent plunge in public investment, warned growth would likely remain soft, while predicting interest rate cuts in the near term. "Overall, we expect the economy to grow by around 4.5 percent in 2026, which would remain below trend and consensus (5.3 percent)," said Asia economist Shivaan Tandon. "With inflation set to stay low, we think the central bank has scope to deliver a couple more interest rate cuts in the coming months."

The Philippine Chamber of Commerce and Industry (PCCI) said "recovery is now imperative" after the flood control mess hurt the economy. "We must focus on ensuring that corrective and preventive measures to ensure that this kind of disruption will not happen again,” said PCCI president Perry Ferrer. Ferrer noted the adoption of the blockchain technology in the 2026 national budget, ensuring that every peso spent is accounted for and data cannot be altered.

Source: news.abs-cbn.com