The economy likely expanded 5.8 percent in the second quarter this year, improving from 5.4 percent in 1Q but still lagging the 6.5 percent growth seen in 2Q 2024, according to the Bank of the Philippine Islands (BPI). The uptick, lead BPI economist Jun Neri said, was mainly driven by household consumption, buoyed by election-related outlays, cooling inflation, and sustained consumer lending. Strength in food exports—aided by improved weather—and advanced bookings for electronics shipments ahead of U.S. tariff hikes also supported demand.
According to Neri, however, weaker government and infrastructure spending amid the election ban, and sluggish electricity sales, hinting at a moderation in industrial and commercial activity, partly offset growth momentum.
The forecast follows 1Q 2025 quarter-on-quarter growth of 1.2 percent, a slowdown from the downwardly revised 1.5 percent in 4Q 2024. That deceleration was largely due to softer household spending (1 percent vs. 2.2 percent) and the trade deficit, as imports jumped 12.5 percent while exports rose just 3.9 percent. Sector-wise, agriculture (1.8 percent) and industry (2 percent) picked up pace in 1Q, but services slowed sharply to 0.8 percent from 2.2 percent.
Despite risks from weather disruptions and global trade tensions, particularly higher U.S. tariffs, Neri maintains that the government’s 5.5 percent to 6.5 percent growth target for the year remains achievable. BPI continues to forecast full-year GDP growth at 5.8 percent, though potential downward revisions are not ruled out.
On inflation, headline CPI in July is expected to ease to 1.1 percent year-on-year, thanks in part to base effects from the 4.4 percent July 2024 print. However, month-on-month inflation is seen rebounding to +0.4 percent, driven by rising fuel, electricity, and food prices, though tempered by further declines in rice prices.
As for monetary policy, BPI expects a 25 basis point rate cut by the Bangko Sentral ng Pilipinas this August, but warns that the window for easing may narrow in 4Q as inflation is projected to return to around 3 percent. With persistent inflation risks, a hawkish U.S. Fed, and a large current account deficit, BPI sees limited room for further cuts, suggesting a policy pause may be prudent later in the year to support peso stability.
