The Philippine economy posted moderate but below-target growth in the first half of 2025, buoyed by seemingly robust household consumption, strong public spending, and steady activity in key service sectors, allowing it to keep pace with its ASEAN peers. However, conditions shifted markedly in the second half of the year as domestic and external developments dampened sentiment and weighed on activity, bringing the full-year GDP growth to 4.4%.
On the expenditure side, household consumption remained the major component of GDP but recent figures hinted the emergence of weaker demand. Government final consumption expenditure revealed a marked deceleration particularly in the second half of 2025. Following the initial records of modest expansion, investment or gross capital formation ended the year with back-to-back quarters of contractions. External demand provided partial support, with exports remaining elevated as imports grew steadily. On the supply side, services continued to anchor growth, though with moderation, while industry and agriculture faced persistent structural and climate-related constraints.
Using a structured application of the standard vector autoregression, the CBPRD forecasts growth to pick up between 4.32% to 5.06% in the first quarter of 2026, falling short of the 5.38% growth recorded in the same period last year. Nevertheless, the Philippine economy enters 2026 with weakened momentum, fragile confidence, and constrained fiscal space. The path forward depends on decisive steps to restore credibility, rebuild trust, and address the structural issues weighing on growth.