Philippines seen growing below government target

MANILA, Philippines — United Kingdom-based think tank Pantheon Macroeconomics is keeping its gross domestic product (GDP) growth forecast for the Philippines at 5.3 percent this year as it expects economic growth to slow in the second half.

“We reiterate our below-consensus 5.3 percent forecast for 2025, implying a renewed slowdown in the second half,” Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco and Asia economist Meekita Gupta said in a report.

Pantheon Macroeconomics’ forecast is below the government’s 5.5 to 6.5 percent growth target for the year.

The Philippine Statistics Authority reported that the economy grew at a slightly faster pace of 5.5 percent in the second quarter compared with the previous quarter’s 5.4 percent.

The second quarter growth performance, however, was slower than the 6.5 percent expansion in the same quarter last year.

The latest growth outturn brought the average growth in the first half to 5.4 percent.

“We expect the recovery in year-over-year consumption growth to remain very gradual well into 2026, with the risks to this repair process still skewed to the downside,” Pantheon Macroeconomics economists said.

While they expect average annual inflation to slide further to just 1.8 percent this year, which will allow the Bangko Sentral ng Pilipinas to continue its interest rate cuts, they said household spending intentions remain depressed.

“This remains no mystery to us, as we’ve been saying for a long time that the damage inflicted by the pandemic and the cost-of-living crisis on household balance sheets was severe and the repair work remains slow,” the economists said.

Household spending grew by 5.5 percent in the second quarter, faster than the 5.3 percent growth in the previous quarter and 4.8 percent increase in the same quarter last year.

In terms of investment growth, the economists said they expect material recovery to wait until next year at the earliest as capacity utilization continues to stay below average.

Gross capital formation growth slowed to 0.6 percent in the second quarter from the previous quarter’s 4.8 percent and 11.5 percent in the same quarter in 2024.

They also said the slowdown in government spending caused by the mid-term election season may continue in the coming quarters.

Government spending growth decelerated to 8.7 percent in the second quarter from 18.7 percent in the first quarter and 11.9 percent in the second quarter last year.

Last week, Department of Economy, Planning and Development Secretary Arsenio Balisacan said the economy is expected to perform better in the second half, citing easing inflation, stronger domestic consumption and the anticipated recovery in public construction following the election spending ban.