Economy to grow by 5% in Q4 – PIDS

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December 5, 2025 | 12:00am

MANILA, Philippines —   The Philippine economy is forecasted to grow at a faster pace of five percent in the fourth quarter compared to the previous quarter, but full-year growth is expected to fall short of the government’s target, according to the state think tank.

In a discussion paper titled Macroeconomic Prospects of the Philippines in 2025 to 2026: Restoring Confidence amid Glocal Transitions, Philippine Institute for Development Studies (PIDS) senior research fellow John Paolo Rivera and research specialists Mark Gerald Ruiz and Ramona Maria Miral said they expect the economy to grow by five percent in the fourth quarter.

The forecast is higher than the four percent growth posted in the third quarter, the slowest pace in four years.

Earlier, Department of Economy, Planning and Development Secretary Arsenio Balisacan attributed the third quarter performance to the contraction in public construction amid revelations of corruption issues in flood control projects.

From January to September, Philippine economic growth averaged five percent, below the government’s target of 5.5 to 6.5 percent for this year.

For full-year 2025, the PIDS expects the economy to expand by around five percent, also below the government’s target for the year.

For next year, the PIDS is projecting a 5.3-percent growth in gross domestic product, which is lower than the government’s target of six to seven percent.

PIDS expects growth this year and the next to be supported by continued, but moderating domestic demand, infrastructure spending, as well as the information technology-business process management, transport, tourism and services sectors.

However, the country faces political and institutional challenges. “The true constraint lies in confidence. There is a deep erosion of trust in governance, policy credibility and the rule of law, exacerbated by the recurring spectacle of corruption scandals that continue to dominate public discourse,” the authors said.

They said governance issues and the government’s inconsistent response to typhoons and other extreme weather events have weakened both domestic and investor confidence, underscoring the need to restore credibility, accountability and effective leadership.

The authors also said the country’s entry into the upper-middle income club may be delayed due to governance issues.

To unlock the country’s growth potential, they said the economy can no longer rely solely on household consumption or favorable demographics.

“Restoring credibility, integrity and trust in governance is no longer optional; it is the foundation of sustained growth that must be earned through structural transformation, institutional credibility and shared reform ownership,” the authors said.

They said penalizing corrupt officials and their accomplices, without exception, should be made an immediate priority.

“The task now is to build an economy that is resilient to shocks, free from corruption, inclusive in opportunity and future-ready, which is the very spirit of AmBisyon Natin 2040,” the authors said.