The Philippine economy slowed sharply in 2025, growing just 4.4 percent—the weakest full-year expansion since the height of the Covid-19 lockdowns—after stalled public and private investments in the wake of a billion-peso flood-control corruption scandal.

Speaking at a press briefing on Thursday, Jan. 29, National Statistician Claire Dennis S. Mapa said the economy grew by just three percent in the fourth quarter of 2025, the slowest pace for the period since the fourth quarter of 2009, when growth stood at 1.8 percent, excluding the pandemic years.

Mapa added that the fourth-quarter growth also matched the three-percent expansion recorded in the third quarter of 2011.

The Marcos Jr. administration has failed to meet its annual economic growth targets since 2023, its first full year in office, with 2025 marking the third consecutive year of missed targets, falling short of the government’s 5.5- to 6.5-percent goal.

“I did not expect this shock,” Department of Economy, Planning, and Development (DEPDev) Secretary and Socioeconomic Planner Arsenio M. Balisacan told reporters. “But the extent is something that I myself expected. But as we said, it is a must for us to do. It is something that has to be done.”

Balisacan identified corruption in infrastructure projects as a major factor behind the slowdown, adding that its effects “would not be expected to last,” echoing President Marcos Jr.’s view that it “cannot be business as usual.”

“And so we would rather have a slowdown, correct the problems, build the trust of our people in their institutions and in their government, and allow government to address climate-related issues,” Balisacan said.

He noted that the lingering effects of last year’s challenges are expected to carry over into the first quarter of 2026.

“We don’t expect that growth will recover to its peak in the first quarter, because we expect some lingering effects of those measures, especially since the budget for this year was delayed,” Balisacan said.

Despite these challenges, he expressed optimism for 2026 and beyond. “Hopefully, by later in the year, we’ll get an acceleration of the pace,” he said. “And we in government are implementing measures quickly—rapidly—to reverse and regain that trust and confidence in government.”

Balisacan also cited weather-related disruptions that led to repeated class and work suspensions, as well as stricter screening of infrastructure projects, as additional drags on growth.

“Admittedly, the flood-control corruption scandal also weighed on business and consumer confidence,” he said.

The country’s chief economist added that these challenges were compounded by lingering global economic uncertainties, with domestic demand growth slowing to 0.7 percent in the fourth quarter and full-year growth easing to 3.7 percent from 5.8 percent in 2024.

Public and private construction, along with private consumption, were among the hardest-hit sectors.

Mapa, meanwhile, said the top contributors to fourth-quarter growth were wholesale and retail trade, repair of motor vehicles and motorcycles (4.6 percent); financial and insurance activities (5.6 percent); and public administration and defense, including compulsory social security (7.9 percent).

For the full year, the leading contributors were wholesale and retail trade, repair of motor vehicles and motorcycles (5.2 percent); financial and insurance activities (5.8 percent); and manufacturing (2.5 percent).

Despite the slowdown, Balisacan said the country remains on track to achieve its long-term aspiration of becoming a high-income economy.

“Our aspiration as a country, as reflected in our long-term plan, is to join our neighbors as a developed country by 2040,” he said.

“Our average growth is still quite close to six percent for the long period from 2010 to the present,” he added. “And we must keep driving for high growth.”

He reiterated that the Cabinet-level, interagency Development Budget Coordination Committee (DBCC) has revised GDP growth targets downward to five to six percent for 2026, 5.5 to 6.5 percent for 2027, and six to seven percent for 2028.

“Hopefully, the potential of the economy is a growth rate of six percent,” Balisacan said, noting that this would require good governance and sound economic management.

He added that investments in human capital—particularly education, health, and infrastructure—could raise the economy’s potential further to 6.5 or even seven percent.

Balisacan also stressed the importance of maintaining strong economic fundamentals.

“We must not be distracted by political noise. Otherwise, you sacrifice sound fundamentals for short-term gains, and that’s not good for long-term growth,” he said.

With 4.4 percent growth in 2025, Balisacan noted that “we’d still be able to reach upper-middle-income status,” adding that growth is only one of several contributing factors.

However, state-run policy think tank Philippine Institute for Development Studies (PIDS) flagged hurdles to the country’s goal of becoming a predominantly middle-class society by 2040.

In a discussion paper released on Jan. 28, PIDS said that while gains in reducing extreme poverty have been significant, the Covid-19 pandemic exposed the fragility of these gains and the vulnerability of many households to economic shocks.

“Achieving the 2040 vision requires bold policy reforms that expand social protection toward universal coverage aligned with upper-middle-income country standards, strengthen household resilience, and address the structural factors that perpetuate vulnerability across sectors,” PIDS said.

On the Philippines’ chairmanship of the Association of Southeast Asian Nations (ASEAN), Balisacan said, “First and foremost, we make sure that the experiences of the leaders and visitors are excellent, because that will then create positive externalities for us.”

He added that this could enhance the country’s appeal not only as a tourism destination but also as a venue for international meetings and conferences.