Germany-based Deutsche Bank AG warned that the Philippine economy likely failed to gain traction in the final months of 2025, as a persistent squeeze on government spending and a slump in consumer confidence threatened to drag full-year growth to its lowest level in more than a decade.

The Frankfurt-based lender expects the country’s economy, as measured by the gross domestic product (GDP), to have stagnated at 4.1 percent in the fourth quarter, matching the sluggish pace seen in the previous three-month period. I

Deutsche Bank attributed the weakness to continued contraction in government outlays, which have historically served as primary engine for the country.

The fiscal bottleneck appears significant as government spending reached only 85.6 percent of the 2025 budget as of November, trailing the five-year average of 90 percent. The impact is most visible in the infrastructure sector, where project payments have been hampered by administrative delays.

Infrastructure spending plummeted 40 percent in October to ₱65.9 billion, from ₱110 billion a year earlier. For the first 10 months of 2025, total capital outlays fell by 13.7 percent to ₱943 billion, a contraction of roughly ₱149.4 billion compared to the ₱1.09 trillion recorded in the same period of 2024.

“Similar to the third quarter, we expect reduced government outlays, with the associated spillover effects on private investment and spending, to drag on growth,” Deutsche Bank analysts wrote.

If the 4.1 percdnt quarterly figure is realized, full-year growth would settle at 4.7 percent. Such a result would represent a significant miss against the government’s revised target of 5.5 percent to 6.5 percent.

Excluding the pandemic-induced recession, it would mark the slowest annual expansion for the Philippines since 2011, when the economy grew by 3.9 percent.

Adding to the headwinds is a cooling consumer base. Deutsche Bank noted that household confidence in the fourth quarter hit its lowest point since 2021. With private consumption accounting for nearly three-quarters of the country's economic output, the shift toward saving over big-ticket purchases poses a direct threat to near-term momentum.

While Deutsche Bank maintains a cautious outlook, other observers see signs of a modest recovery. Moody’s Analytics raised its fourth-quarter growth forecast to 5.3 percent from an earlier 4.3% estimate, citing resilient demand for electronics exports.

Even under this more optimistic scenario, the resulting 5.1% full-year growth would still fall short of official targets. Economists at Moody’s also cautioned that a series of destructive typhoons late in the year likely hampered agriculture and disrupted supply chains, tempering the gains from the tech sector.