Philippine Q3 GDP growth likely hit by muted spending, analysts say

MUTED government spending and weaker business sentiment likely dragged third quarter growth further below this year’s target, analysts said.

The median forecast in a Manila Times poll was 5.0 percent, lower than the 5.5 percent recorded three months earlier and below the government’s 2025 goal of 5.5-6.5 percent.

Gross domestic product growth (GDP) currently averages just below the lower end of the target as the expansion in the first quarter of the year was 5.4 percent.

Preliminary third quarter data will be released by the Philippine Statistics Authority this Friday, Nov. 7.

With the lowest forecast of 4.8 percent, Pantheon Macroeconomics economist Miguel Chanco and Chinabank Research said that both local and global headwinds would have weighed on GDP growth.

Chanco pointed to weaker consumption and government spending along with a slight drag from net exports, but said that steady fixed investment may have provided some support.

“Economic growth will remain quite sluggish, from our perspective, at the mid-5 percent range at best, notably below the government’s aspirations,” he added.

“This will be down mainly to continued disappointment on the private consumption front, which for a long time we’ve argued will continue to be held back by weak balance sheets.”

Chinabank Research, meanwhile, said capital formation likely declined as public infrastructure spending slowed amid an ongoing probe into corruption in infrastructure projects.

“Other investments, however, such as in durable goods may have picked up, supported by lower borrowing costs,” it said.

Union Bank of the Philippines chief economist Ruben Carlo Asuncion and Sun Life Investment Management and Trust Corp. economist Patrick Ella also expect slower growth with identical forecasts of 5.0 percent.

Asuncion said growth may have been affected by weak external trade, global uncertainties and natural disasters such as recent typhoons and earthquakes that disrupted economic activity.

He also noted that the manufacturing sector had shown signs of weakness while foreign direct investments and the stock market remained sluggish.

“We expect modest improvement in Q4 as fiscal spending catches up and monetary easing gains traction,” Asuncion said. “Risks remain tilted to the downside due to external headwinds and domestic execution challenges.”

ING Global Market Research, meanwhile, said growth could have also slowed to 5.1 percent, primarily due to a significant decline in government spending.

“This follows corruption scandals associated with flood control projects. Business sentiment also took a hit in the third quarter, with tariff uncertainties adding to the drag on growth,” it said.

Rizal Commercial Banking Corp. chief economist Michael Ricafort projected third-quarter growth of 5.3 percent, citing the impact of trade tensions that have slowed global trade, investments and jobs.

He added that recent storms and earthquakes also disrupted business operations and reduced working days in some areas.

“Political noises could reduce government spending on infrastructure amid anti-corruption measures that led to reduced business sentiment,” he added.

Emmanuel Lopez of the University of Santo Tomas Graduate School bucked the slowdown forecast trend, predicting third-quarter growth of 5.7 percent despite the impact of the flood control project scandal on state spending.

Economic managers have warned that the expansion could slow due to the impact of bad weather and the massive corruption scandal that has weighed on infrastructure spending.

Finance Secretary Ralph Recto last month said 2025 growth could slow to 5.4 percent from 5.7 percent last year and that quarterly results could decline up to next year.

“If part of the budget hadn’t been lost to corruption, the economy might’ve been growing by around 6 to 6.2 percent,” he said.

Socioeconomic Planning Secretary Arsenio Balisacan also said a third-quarter slowdown was likely but added that the lower end of this year’s target remained achievable.

The Bangko Sentral ng Pilipinas (BSP), which unexpectedly cut key interest rates anew last month to support economic growth, has also noted that the GDP growth outlook had weakened.

BSP Governor Eli Remolona Jr. said growth had underperformed as “what we thought was going to investment wasn’t going there at all.”

“[T]he reason we were underperforming is, I think, in large part because of the governance issues related to infrastructure spending.”