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Economy January 28, 2026

Philippine Economy Slows in Q4 as Growth Hits 3%, Below Poll Forecast

Weak fourth-quarter expansion and infrastructure-linked spending cuts lower full-year growth to 4.4% and raise prospect of further central bank easing

By Leila Farooq
Philippine Economy Slows in Q4 as Growth Hits 3%, Below Poll Forecast

The Philippine economy expanded 3% year-on-year in the fourth quarter of 2025, underperforming a median 4% forecast and slowing from a downwardly revised 3.9% growth in the prior quarter. Full-year GDP rose 4.4%, missing the government’s 5.5% to 6.5% target. A corruption scandal that curbed public infrastructure spending last year contributed to the weak outcome and has increased the likelihood of additional monetary easing by the Bangko Sentral ng Pilipinas.

Key Points

  • Q4 2025 GDP rose 3% year-on-year, below the 4% median forecast and down from a downwardly revised 3.9% in Q3 - impacts macroeconomic outlook and short-term growth expectations.
  • Full-year 2025 GDP increased 4.4%, missing the government’s target range of 5.5% to 6.5% - relevant to fiscal planning and public investment timelines.
  • Weaker growth raised the chances of additional policy easing by the Bangko Sentral ng Pilipinas ahead of its Feb. 19 meeting; the central bank has already cut its benchmark rate by 200 basis points to 4.5% during the current cycle - important for interest-rate-sensitive sectors and financial markets.

The Philippine economy grew 3% in the fourth quarter of 2025 compared with the same period a year earlier, the statistics agency reported on Thursday. That rate was below the 4% median forecast in a Reuters poll and represented a slowdown from the previous quarter, which was downwardly revised to a 3.9% expansion.

For the full year 2025, gross domestic product rose 4.4%, falling short of the government’s targeted range of 5.5% to 6.5%. Officials and market watchers pointed to a combination of factors behind the underwhelming performance, including a corruption scandal connected to infrastructure projects that curtailed public spending during the year.

The disappointing fourth-quarter reading has implications for monetary policy. The weaker-than-expected outcome increased the odds that the Bangko Sentral ng Pilipinas (BSP) may consider further rate easing at its upcoming policy meeting scheduled for February 19. BSP Governor Eli Remolona said last week that if fourth-quarter GDP proved to be weaker-than-expected, it would inform the central bank’s decision on whether to take action at that meeting.

So far in the current easing cycle, the central bank has reduced its benchmark interest rate by a total of 200 basis points, bringing the policy rate to a three-year low of 4.5%. Governor Remolona has said this cycle of cuts was nearing its end.

The slowdown tied to reduced public infrastructure spending highlights the interaction between fiscal execution and growth outcomes. The corruption scandal cited in official commentary was specifically linked to infrastructure projects and is reported to have slowed disbursements and implementation last year, contributing to the economy’s lacklustre pace.

With fourth-quarter GDP below the median forecast and full-year growth missing the government’s stated target, policymakers face a narrower set of options as they approach the central bank meeting scheduled for mid-February. The data released on Thursday will be among the inputs informing whether further monetary easing is warranted.

Risks

  • A corruption scandal tied to infrastructure projects slowed public spending last year, reducing the fiscal support that could have bolstered growth - this poses uncertainty for the construction and public works sectors.
  • Weaker-than-expected GDP increases the likelihood of further central bank rate cuts, which could alter borrowing costs and returns across financial markets and interest-rate-sensitive industries.
  • Missing the government’s 2025 growth target of 5.5% to 6.5% creates uncertainty for policymakers and could affect planning for public investment and stimulus measures.

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