The Philippine economy grew at its slowest pace in nearly five years in the third quarter of 2025, dragged down by disruptions to government spending linked to a flood control corruption scandal and weakened investor confidence.
The Philippine Statistics Authority (PSA) reported Friday that the gross domestic product (GDP) expanded by 4.0 percent year-on-year in the third quarter. This marks the slowest growth since the economy contracted by 3.8 percent in the first quarter of 2021 and is slower than the 5.5-percent growth in the second quarter and 5.2 percent in the third quarter of 2024.
This result pushed the average GDP growth for the first three quarters of the year to 5.0 percent, falling short of the government’s revised target range of 5.5 percent to 6.5 percent for 2025.
The Makati Business Club (MBC) directly linked the sluggish growth to the corruption scandal. “The significantly lower third-quarter GDP growth result of four percent illustrates how the corruption scandal has begun to affect our macroeconomic performance,” MBC executive-director Apa Ongpin said in a statement.
Ongpin said the scandal did not directly slow growth, but “it slowed government spending, as many programmed infrastructure projects are on hold or even in limbo, as the DPWH and the ICI investigate them. Government spending is an important driver of economic growth.”
The Federation of Philippine Industries (FPI) echoed the alarm, calling the weak growth a “wake-up call” due to weak consumer demand, delayed government spending and investor hesitation amid corruption probes and policy uncertainty.
FPI chairperson Beth Lee said the deceleration reflected “several challenges hitting the economy all at once—from slower household consumption as prices bite and confidence dips, to reduced public expenditures due to procurement delays and controversies surrounding flood-control projects.” Investments were also subdued, she said, because “businesses are cautious with all the corruption probes and policy uncertainty,” adding that typhoon-related disruptions and global economic headwinds further weighed on growth.
Oxford Economics lead economist Sunny Liu said the deceleration reflects the impact of adverse weather, “public unrest due to corruption allegations in flood-control projects and ongoing external uncertainties.”
Oxford Economics revised its GDP growth forecast for 2025 down to 4.9 percent year-on-year and expects 5.5 percent year-on-year growth in 2026, although risks are “skewed to the downside.”
Despite the setback, the government remains optimistic. Department of Economy, Planning and Development (DEPDev) Secretary Arsenio Balisacan said the third quarter’s performance “reminds us of the urgent need to address key challenges and strengthen our foundations for rapid, sustained and inclusive growth.”
Investments tumbled 2.8 percent in the third quarter from a year ago, with the industry sector posting a sluggish 0.7 percent.
Balisacan pointed to a sharp contraction in public construction due to stricter validation measures for the Department of Public Works and Highways (DPWH) civil works, which delayed billings and disbursements for government projects.
On the demand side, household final consumption expenditure grew year-on-year by 4.1 percent, but the PSA noted that “widespread cancellations of school, work and travel activities due to typhoons likely dampened spending.” Consumer confidence was also affected by ongoing probes, prompting households to postpone purchases of durable goods.
Government final consumption expenditure went up 5.9 percent. Exports of goods and services rose 7.0 percent, while imports went up 2.6 percent. The gross capital formation declined 2.8 percent. The gross national income, a broader measure, grew by 5.6 percent.
Balisacan said the government is implementing strategic interventions to bolster investor confidence and consumer trust, including fast-tracking social protection and financial aid for calamity-affected families and restoring infrastructure in areas severely impacted by recent typhoons and an earthquake.
He acknowledged that economic losses from extensive class and work suspensions in the third quarter due to successive typhoons may not be fully recovered within the year, but stated these are “temporary setbacks.”
“With sustained interventions and improved resilience, we expect the economy to rebound in 2026,” Balisacan said, noting the Philippines’ “strong macroeconomic fundamentals—low inflation, manageable fiscal deficit and public debt, stable currency and external balance, and a stable banking sector.”
He said the government is “committed to rebuilding investor confidence and restoring public trust by upholding sound economic governance toward inclusive growth and raising further the potential of our economy by accelerating the momentum for transformative reforms.”
