THE Bangko Sentral ng Pilipinas is now more likely to cut interest rate by another 25 basis points on Feb. 19, 2026 after the gross domestic product (GDP) missed the government’s target in 2025, growing by 4.4 percent, according to US bank Citi.
The Philippine economy slowed more sharply than anticipated in the final quarter of 2025 as a slump in public investment and a cooling of private consumption dragged growth to a post-pandemic low of 3.0 percent, it said.
The fourth-quarter performance missed both the 3.4 percent forecast from Citi and the 3.7 percent market consensus, falling from a revised 3.9 percent in the third quarter. The slowdown was largely attributed to spending bottlenecks following corruption scandals in September, which heavily impacted the construction sector and government outlays.
Citi economists said in a report that the growth figures increase conviction for a 25-basis-point policy rate cut by the Bangko Sentral ng Pilipinas in February.
“The sharp fourth-quarter growth slowdown increases our conviction for a 25-bps-rate cut in the Feb. 19 meeting. A terminal rate of 4.25 percent in February remains our base case, bringing real policy rates slightly below 1.5 percent. With regard to the risk scenario, an additional cut in April cannot be ruled out, in our view, especially if GDP growth further decelerates in first quarter, contrary to our recovery forecast,” Citi said.
Department of Finance Secretary Frederick Go expressed optimism that the Philippines could meet its 5-percent growth target this year, noting that the country’s long-term fundamentals remain intact despite recent headwinds.
“I’m hopeful that we will achieve that. I just have to say though that the whole year is four quarters. We’re not going to get there [in] the first quarter,” Go told reporters on the sidelines of the Philippine Life Insurance Association’s (PLIA) 2026 induction ceremony.
Asked when it could happen, Go said it would happen progressively. “If we do everything right, it’s progressive,” he said.
The Philippine Chamber of Commerce and Industry (PCCI) also expects the economy to regain momentum in the first quarter of 2026 after growth slowed to 3 percent in the final quarter of 2025, missing government targets.
Data from the Philippine Statistics Authority showed the economy grew by 4.4 percent in 2025, the third consecutive year the nation missed the government target range.
PCCI president Perry Ferrer attributed the year-end slowdown to a sharp pullback in public spending. The reduction followed a corruption scandal involving infrastructure projects that led the government to halt various disbursements.
“The 3 percent growth rate in the fourth quarter of 2025 was an after effect of the corruption scandal. This was expected, as government reduced or even stopped public spending,” Ferrer said.
He said the PCCI welcomes a move by the Department of Public Works and Highways to cleanse the agency and resume infrastructure spending.
While the services sector drove growth with a 5.9-percent expansion, the industry sector struggled, growing only 1.5 percent for the year. Industry contracted by 0.9 percent in the fourth quarter due to weaknesses in construction, mining and utilities.
Manufacturing grew by 2.5 percent, supported by domestic demand for consumer goods and automotive activities. Agriculture, forestry and fishing grew 3.1 percent, showing resilience against climate-related disruptions.
Federation of Philippine Industries chairperson Elizabeth Lee said the fourth-quarter industrial contraction highlights structural weaknesses that threaten long-term stability.
“The numbers show a stark truth—services alone cannot carry the Philippine economy. Without a strong industrial backbone, the country risks overdependence on services, which cannot fully absorb employment demand or provide the production base for global competitiveness,” Lee said.
Lee cited high energy costs, supply chain disruptions and slow infrastructure rollout as primary weights on industrial performance. She called for urgent action to strengthen manufacturing through innovation, export diversification and energy resilience.
