Economists warn
MANILA, Philippines — Philippine economy risks settling into a slower five to six percent growth path in the coming years unless structural bottlenecks in key sectors are addressed, bank economists said.
Bank of the Philippine Islands (BPI) lead economist Jun Neri said the 5.5 percent gross domestic product (GDP) expansion in the second quarter points to a possible “new normal” for growth that is well below the 6.4 percent average before COVID-19.
The economy expanded by 5.5 percent in the second quarter, slightly faster than the previous quarter’s 5.4 percent but slower than the 6.5 percent recorded a year ago, marking the fourth straight quarter that growth stayed below six percent.
“The slowdown can be traced largely to consumption, construction and manufacturing,” Neri said.
While household spending picked up pace in the April to June period as inflation eased, Neri said its 5.5 percent growth still lagged the 5.9 percent average seen in the decade before the pandemic.
“Slower consumption growth in recent quarters suggests that consumer spending may no longer be sufficient to lift the economy beyond six percent growth under current conditions,” Neri added.
He noted that the global environment today is more challenging, with faster inflation driven by geopolitical tensions, supply disruptions and uncertainties in trade. Meanwhile, the rise of e-commerce and cross-border purchases may have made official consumption figures harder to capture, possibly masking some spending activity.
On the investment side, Neri said construction grew by just two percent in the second quarter compared to its pre-pandemic average of 10.8 percent, with public works slowed by the election ban and developers holding back new projects amid tepid demand in the mid-market and elevated office vacancies.
“The economy must shift from being consumption-driven to production-driven, with policies that promote long-term investment and industrial development,” Neri said.
United Overseas Bank (UOB) economists Julia Goh and Loke Siew Ting said the Philippines remains one of Southeast Asia’s faster-growing economies, but continues to fall short of the government’s goal of above six percent annual expansion.
This reinforces expectations that the Bangko Sentral ng Pilipinas will cut policy rates by another 25 basis points later this month and a further 25 basis points in December to safeguard growth.
“While the direct impact of US tariff policies on the Philippine economy appears to be marginal, the secondary effects especially coinciding with a more protracted downturn in China warrant a close monitoring,” UOB said.
Still, Goh and Ting added that benign inflation, higher wages and sustained remittances could support domestic demand in the second half, even as external risks loom.
For BPI, sustaining growth above six percent will require a policy push to revitalize industry, encourage long-term investment and maintain competitiveness in services such as tourism and outsourcing.
“The ideal outcome is for the economy to have several drivers of growth, with consumption serving as the foundation rather than the end in itself,” Neri said.