Tempered household consumption, still reeling from the pandemic-induced recession, is weighing on the Philippine growth outlook, according to the Economist Intelligence Unit (EIU).

With private consumption—which accounts for more than 70 percent of the local economy—showing “weak momentum,” EIU Asia analyst Kalyani Honrao and Asia-Pacific regional director Alex Holmes lowered their 2025 gross domestic product (GDP) growth forecast for the Philippines to below six percent from 6.4 percent previously. The government targets 5.5- to 6.5-percent growth this year.

“While we had expected accelerating private consumption to override headwinds from elsewhere, consumers’ reluctance to spend has led us to revise our view,” they said in an Aug. 7 report, a copy of which was obtained by Manila Bulletin.

While EIU noted that real GDP growth quickened to 5.5 percent year-on-year in the second quarter, this expansion was “below our expectation for a stronger pick-up, with the main engine of the economy—consumption—failing to gain much traction.”

“EIU’s cautiously optimistic view that the Philippines will be a bright spot this year amid global trade tensions is now fading,” the report read.

EIU explained that second-quarter growth was underwhelming, falling short of expectations despite several supportive factors—including a prolonged decline in inflation and interest rates, along with a recent boost in government spending—all of which were expected to accelerate real disposable income and drive a stronger rebound.

According to EIU, the lingering effects of the Covid-19 pandemic—at the height of which, in 2020, wrought the Philippines’ worst post-war recession—have left households with higher debt and lower savings, leading many to prioritize saving over spending despite rising disposable incomes.

“The shadow of the pandemic appears to have been longer than we thought,” EIU said.

Even now, “the indicated proportion of households putting money aside jumped back to levels not seen since before the pandemic,” it added.

Citing Bangko Sentral ng Pilipinas (BSP) data, EIU pointed out that consumer credit demand has also slowed to its weakest pace since 2021, as households focus on deleveraging and reducing reliance on short-term borrowing.

As such, EIU also lowered its expectations for how much rising income will drive spending, as households continue to prioritize repairing their balance sheets.

Also, EIU said government consumption is expected to ease further following pre-election spending ahead of the May 2025 midterm polls, “as some subsequent fiscal moderation will be required to keep the budget deficit for the year in check.”

EIU expects public investment to recover slightly after a weak second quarter driven by soft construction activity, while the trade outlook remains uncertain amid global headwinds.

“Despite strong merchandise trade, export growth disappointed because of continued weakness in service exports. Tourism remains stuck in a rut, with foreign arrivals only just above 60 percent of their 2019 levels and Chinese visitors still almost entirely shying away,” it said.

“The boost from goods exports will probably fade, as support from global trade front-loading quickly peters out,” EIU added.

Philippine goods exports climbed 13.2 percent year-on-year to a record $41.24 billion in the first six months of 2025, as exporters front-loaded shipments ahead of the 19-percent tariff to be imposed by the United States (US), the country’s top export market.

In the month of June alone, sales of Philippine-made products overseas jumped by a faster 26.1 percent year-on-year to $7.02 billion.

The first-half performance came despite the Cabinet-level Development Budget Coordinating Committee’s (DBCC) pessimistic expectations back in June, projecting merchandise exports to decline by two percent in 2025 “largely due to slower global demand and heightened trade policy uncertainties.”