Global debt watcher Fitch Ratings maintained its 5.6 percent growth forecast for the Philippines this year, citing support from large government infrastructure investments, robust services exports, and private consumption.

However, the New York-based credit rating agency warned that the ongoing political turmoil over the alleged misuse of the flood control fund could dampen investor confidence.

“We expect the Philippines’ economy to expand by 5.6 percent in 2025, broadly in line with 2023-2024, fueled by the traditional growth drivers of large public infrastructure investments, services exports, and remittance-funded private consumption,” Fitch said in a report published on Monday, Oct. 27.

If realized, this expansion would fall within the downscaled target of 5.5 percent to 6.5 percent of the Marcos administration.

Department of Budget and Management (DBM) Undersecretary and Principal Economist Joselito Basilio told reporters on Monday, Oct. 27, that President Marcos’ economic team would likely retain the current macroeconomic targets at its upcoming meeting.

Basilio noted that private consumption would support the growth.

“Private consumption will increase because of lower interest rates. So we can expect growth to be driven by the private sector this time,” he said.

Fitch also noted that private sector consumption should be buoyed by easing inflation and interest rates. Inflation clocked in at 1.7 percent in September, the fastest in six months.

The Bangko Sentral ng Pilipinas (BSP) delivered its third reduction in key borrowing costs in October, bringing the rate to 4.75 percent — the same level as in September 2022, before a series of rate hikes raised it to a peak of 6.5 percent.

“However, domestic political uncertainty could affect investment, with allies of President Ferdinand Marcos doing worse than we expected in the recent midterm elections and a recent corruption scandal,” Fitch said.

Additionally, the World Bank Governance Indicator identified the Philippines as having “weaker” governance standards than other countries rated ‘BBB,’ which Fitch believes to be an overstatement.

The BSP earlier cited governance concerns on infrastructure spending as among the major factors behind its easing decision, which is designed to counter the looming slowdown in output expansion.

Public spending as of end-August expanded by 7.1 percent to ₱3.95 trillion from ₱3.69 trillion a year earlier. This accounted for 65 percent of the revised full-year target of ₱6.08 trillion.

According to Basilio, the moderation in infrastructure spending is unlikely to pull growth below 5.5 percent due to catch-up and post-election activities of government agencies, along with soft infrastructure projects.

He expects GDP growth to meet the full-year target, with rates in the third and fourth quarters possibly hitting around 5.9 percent.

Basilio said the Cabinet-level Development Budget Coordination Committee (DBCC) is set to meet in late November or early December to revisit its medium-term macroeconomic targets.