Most global financial institutions anticipate a sharp slowdown in the Philippine economy in the third quarter, as the massive flood control corruption scandal has taken a toll on government spending for public goods and services.

In an Oct. 31 report, Deutsche Bank Research said its third-quarter gross domestic product (GDP) growth forecast of 5.2 percent year-on-year for the Philippines “primarily reflects our projected slowdown in government spending and investment amid the ongoing domestic governance concerns.”

The government’s report on third-quarter GDP performance will be released on Friday, Nov. 7. Members of the Marcos Jr. administration’s economic team earlier conceded that underspending in the aftermath of the flood control controversy would weigh on growth.

“Still, household spending should remain steady, supported by real income gains from the low inflation environment, while trade data show that export activities have held up well amid a resilient global tech cycle,” Deutsche Bank Research said.

Manila Bulletin earlier reported that goods exports as of end-September 2025 surged to a nine-month high of $63.02 billion, despite government expectations of a two-percent full-year decline.

Singapore-based DBS Bank Ltd. shared a similar third-quarter growth projection as Deutsche Bank Research’s “on the back of political uncertainties (flood control project corruption allegations) and typhoons, which are expected to have hurt sentiments and delayed fresh investment spending.”

“On the other hand, consumption should have benefited from policy easing and soft inflation prints, while trade held ground on frontloading of demand as well as supportive electronics exports,” DBS said in a Nov. 3 report.

DBS noted that if its forecast is accurate, the end-September average growth of 5.4 percent would be a shade below the government’s already downgraded target of 5.5 to 6.5 percent for 2025.

In a Nov. 5 report, also Singapore-based Oversea-Chinese Banking Corp. Ltd. (OCBC) said it stands by its earlier projection that Philippine growth will average 5.5 percent in 2025—at the lower end of the government’s goal—even as this reflects a continued negative output gap.

A negative output gap refers to the difference between actual and potential GDP. The Philippines is widely believed to have the potential to sustain a six-percent annual growth rate in the near to long term.

However, OCBC said the Philippine growth outlook “remains marred by governance concerns over public infrastructure spending, likely leading to slower disbursements of government expenditures.”

“Private sector investment spending could also become more constrained as businesses remain in wait-and-see mode due to both domestic and external developments,” OCBC added.

For the third quarter, OCBC projected Philippine GDP growth also at 5.2 percent, which it attributed to a slowdown in infrastructure spending—mainly from the Department of Public Works and Highways (DPWH)—alongside weaker remittance growth, softer export gains, and fewer tourist arrivals.

Meanwhile, Moody’s Analytics was more optimistic, forecasting accelerated GDP growth in the Philippines during the July-to-September period.

“The Philippine economy likely expanded 5.9 percent year-on-year in the quarter... Household consumption likely drove the pickup,” Moody’s Analytics said in an Oct. 31 report.

“Lower borrowing costs, subdued inflation, and healthy remittance inflows will be part of that story. Exports should lend a hand, as they were relatively resilient through July and August,” it added.