The country’s economic expansion is expected to fall short of the government’s targets, with growth projected at 4.7 percent in 2025, 5.1 percent in 2026, and 5.8 percent in 2027, even as household consumption remains robust, according to the Organization for Economic Cooperation and Development (OECD).

The government’s gross domestic product (GDP) growth target for 2025 is 5.5 to 6.5 percent, and six to seven percent for 2026 to 2028.

“Following strong growth in the first half of 2025, momentum weakened in the third quarter, with growth slowing to four percent year-on-year,” read OECD’s Economic Outlook for December 2025, published on Tuesday, Dec. 2.

Third-quarter GDP growth was the slowest quarterly expansion in 4.5 years, mainly as government spending on public goods and services was tempered following the infrastructure corruption scandal involving billions of pesos worth of “ghost” and substandard flood-control projects.

The OECD report highlighted that “inflation is anticipated to fall to 1.6 percent in 2025, before gradually reverting to the midpoint of the central bank’s two- to four-percent target band as favorable food and energy price shocks fade and domestic demand recovers,” noting that commodity prices have eased, helping contain external price pressures, although the currency has weakened by around six percent over the past six months.

It also added that consumer sentiment has strengthened slightly even as business confidence weakened, noting that “low inflation and improving financing conditions remain supportive.”

Despite the slowdown, OECD noted that the Philippines’ “private consumption has remained resilient, underpinned by a strong labor market, with the unemployment rate at close to four percent in September, close to the lowest levels recorded in recent years.”

The latest preliminary data from the Philippine Statistics Authority (PSA) showed that the country’s jobless rate dipped to 3.8 percent in September from 3.9 percent in August.

OECD reported that investment has slowed, driven by a 26-percent year-on-year drop in government construction in the third quarter amid the public works corruption scandal. However, it added that, “investment is expected to recover modestly over the coming quarters as borrowing costs decline and public investment picks up, but slower export momentum amid ongoing external uncertainties and softening global demand may temper gains.”

Industrial production and merchandise exports have also eased, although tourist arrivals have partially rebounded following a mild slowdown earlier this year, OECD said.

“Exposure to higher US [United States] tariffs is relatively limited, with merchandise exports to the US amounting to around 2.5 percent of GDP,” the report added.

OECD also noted that the Philippines, along with China, Indonesia, Malaysia, Thailand, and Vietnam, is expected to see a moderate improvement in its fiscal balance.

Meanwhile, “despite internal and external headwinds, the Philippine economy is still projected to grow moderately through 2025 to 2026, with real GDP expansion most likely at around five percent in 2025 and 5.3 percent in 2026,” state-run think tank Philippine Institute for Development Studies (PIDS) said in a discussion paper titled “Macroeconomic Prospects of the Philippines in 2025-2026: Restoring Confidence amid Glocal Transitions,” published on Wednesday, Dec. 3.

PIDS senior research fellow John Paolo R. Rivera, research specialist Mark Gerald C. Ruiz, and research analyst Ramona Maria L. Miral projected headline inflation will ease to an average of 1.9 percent in 2025 and rise slightly to 2.2 percent in 2026, aligning with the Bangko Sentral ng Pilipinas (BSP) target range of two to four percent.

The think tank said the Philippine peso is expected to trade between ₱58 and ₱59 per US dollar until late 2025 and early 2026, supported by strong remittances, business process outsourcing (BPO), and travel, tourism, and hospitality (TTH), as well as BSP interventions to prevent sharp fluctuations and allow the currency to stabilize naturally.

“While the Philippine economy remains on a growth path, fiscal risks are becoming more pronounced in 2025,” the think tank warned.

The think tank added that rising costs from rapid onset climate events (ROCE) such as typhoons, floods, and droughts are creating recurring fiscal pressures, particularly for disaster relief, infrastructure repair, and agricultural support. It warned that without stronger disaster risk management, financing strategies, and governance reforms, these shocks could undermine budget credibility and hinder medium-term development goals.

“These developments underscore the urgent need to strengthen fiscal governance, improve procurement transparency, and enhance institutional capacity for public investment,” the think tank said.

“Overall, persistent institutional weaknesses, notably corruption and weak public investment returns, continue to weigh on growth prospects,” the think tank added.

(Ricardo M. Austria)