The economy rounded 2025 on a weak footing, raising the likelihood of another policy rate adjustment by the Bangko Sentral ng Pilipinas (BSP).
Gross domestic product grew just 3 percent in the fourth quarter, well below expectations, after earlier quarters were revised lower. On a seasonally adjusted basis, the economy barely expanded from the previous quarter. Full-year growth slowed to 4.4 percent, sharply down from 5.6 percent in 2024 and the weakest pace since the post-pandemic recovery began.
The slowdown, based on data from the Phlippine Statistics Authority, was driven mainly by weak domestic demand. Household spending lost momentum despite low inflation and earlier interest rate cuts, suggesting cheaper borrowing was not enough to lift consumer confidence. Government spending also softened following corruption scandals linked to food control projects, which appear to have hurt public trust and discouraged private investment. Business investment weakened further, deepening the slowdown.
Exports were a bright spot, supported by strong electronics shipments even as U.S. tariffs rose. However, exports account for a smaller share of the economy than consumption and were not enough to offset weak activity at home.
Analysts, on looking ahead to 2026, said risks tilt to the downside. Global trade conditions are deteriorating, threatening exports, while domestic confidence is expected to remain fragile as the government works to restore credibility and normalize spending.
For monetary policy, the weaker-than-forecast growth keeps further easing firmly in play. BSP Governor Eli Remolona has said that additional rate adjustments “remain on the table,” a point he reiterated in a January 6 meeting with members of the Tuesday Club. With inflation subdued and growth underperforming, another rate cut is increasingly likely. Still, policymakers acknowledge that lower rates alone may have limited impact unless confidence improves and government spending and governance issues are addressed.
