Unmistakably, the Philippine economy is slowing down. But the latest GDP data bring to light just how compromised the economy has become.

In 2025, the economy’s production grew by only 4.4%. That’s the lowest GDP growth rate since 2011, if you exclude the pandemic economic crisis. Pre-pandemic, it was normal for us to get 6% growth or more. But those days are gone, I’m afraid.

In the last quarter of 2025, growth clocked in at an even worse level of 3%. This is highly unusual, because growth usually picks up during the “ber” months.

These figures are far weaker than expected. Nobody among the government, the private forecasters, and even multilateral agencies got it right.

Back in 2022, President Ferdinand Marcos Jr. originally promised the nation growth of 6.5–8% growth by 2025. In June 2025, they revised downward their target to 5.5–6.5%. Feeling that even this might be unattainable, they further lowered it this month to just 5–6%. But even that they failed to reach.

For its part, the Philippine Institute for Development Studies (PIDS) forecasted 5% for the full-year figure — also rather optimistic.

As for the private sector, BusinessWorld reported that their forecasters had a median growth rate projection of 4.8% for 2025, and 4.2% for the fourth quarter of 2025. Yet even the lowest forecasts were higher than the actual figures. Multilaterals were also too optimistic: both the International Monetary Fund and the World Bank forecasted 5.1% in December 2025, while the ASEAN+3 Macroeconomic Research Office (AMRO) forecasted 5.2%.

Causes of anemic growth

What led to dismal growth?

Government is prone to mention external factors. Sure, growth has softened across much of Asia amid weaker global demand and heightened uncertainties. But the Philippines’ deceleration has been steeper than many peers.

Vietnam, I must note, grew by an amazing 8% in 2025, despite the trade offensive of US President Donald Trump. This suggests that the Philippine slowdown is very much rooted in domestic events.

My own parsing of the data shows that 2025 saw the third consecutive year where the contribution of private sector spending went down (Figure 1). This usually happens during times of high inflation, but inflation is low and stable of late. Spending on food and health, in particular, went down significantly in the last quarter of 2025.

Figure 1

But what really pulled down growth in 2025 was the sheer drop in the contribution of investment spending, in turn driven by plummeting government construction. Households’ construction activities also contributed almost nothing to total construction growth in the last quarter of 2025.

Figure 2

Among the sectors, I note an alarming disappearance of the contribution of industry to total growth, again a reflection of the drying up of public construction. This was coupled by an alarming decline in services’ contribution as well — historically the sector with the highest value-added.

Figure 3

The government, through the Department of Economy, Planning, and Development (DEPDev), said in a press release that “reform efforts… have affected recent growth performance.” They’re probably referring to the anti-corruption scandal brought to light by President Marcos himself mid-2025. It’s a scandal that proved to be a Pandora’s box, exposing layer after despicable layer of corruption in many (and often colluding) corners of government.

But was the drag on spending and GDP growth due to true, meaningful government “reform efforts”? Or just because of the sudden stop in public disbursements?

I think it’s the latter: 2025 ended with “big fish” going scot-free, while the Independent Commission on Infrastructure, tasked by Marcos to build the case for infrastructure corruption cases, was close to disbanding as two of the three commissioners resigned.

With only small fry being caught and jailed so far, Filipinos have all but lost hope that Marcos will go after the corrupt.

Meanwhile, the 2026 national budget, signed by Marcos in early January 2026, is still riddled with pork items like massive financial aid, farm-to-market roads, and assistance to local governments. Patronage-driven budget items are still very much in place, contrary to claims of many politicians calling the 2025 budget the “cleanest” one.

The latest GDP data highlight just how reliant recent growth has become on construction-led investment. Public works projects typically have huge “multiplier effects” in the economy, meaning that they tend to spur economic activity beyond the confines of the construction industry. So take away public works, and the effects cascade to the rest of the economy, too.

We need new growth drivers

At any rate, our leaders need to sit down and seriously rethink what drives our economy. An honest-to-goodness conversation needs to happen about new growth drivers that can deliver us from stagnation as we approach the middle of the 21^st century. (Note that in 2026, we’re now closer to 2050 than to 2000.) 

For starters, we can boost consumption spending by lowering the cost of food items, not by price controls but establishing greater competition in agricultural and food markets, and laying down efficient transportation networks for goods and people.

Remittances fuel consumption significantly, but remittance growth has steadily lowered since the start of the century. Earnings from business process outsourcing (BPO) industry are also under threat from other tech-savvy countries, the exponential rise of artificial intelligence, and the uncompetitive Philippine labor market (a recent report showed that less than 1% of Grade 12 students were considered proficient in their studies).

As for investments, foreign direct investments have significantly dropped in late 2025, what with more attractive destinations like Vietnam and the corruption scandal that eroded investors’ confidence. Anemic growth might pressure the Bangko Sentral ng Pilipinas to lower interest rates to encourage borrowing and spending. But monetary policy can only do so much to prop up domestic demand, and it certainly can’t make up for the poor investment appetite from foreigners.

Of course, the quality of growth also matters a lot: even supposing we obtain higher growth, that might only enrich only politicians and contractors and billionaires — not the great bulk of the population. Even DEPDev Secretary Arsenio Balisacan mused in the press release that corruption-driven growth won’t lead to inclusive growth.

In addition, my friend AJ Montesa posted on Facebook that the mean basic pay of workers has trailed the growth of GDP per worker, a measure of productivity, for many years. The yawning gap between wages and productivity in the country has long been a puzzle. But it points to highly unequal sharing of the fruits of growth (even as a 2025 study showed that recent growth has been somewhat more beneficial for the poor).

With only about 2.5 years left in office, the economic legacy of President Marcos is now taking shape: he’s about to bequeath an economy that’s nearly grinding to a halt, weighed down by large-scale corruption that was allowed to flourish under his watch. (This is why it’s baffling to me that some pundits and scholars are trying their best to minimize rather than emphasize the impact of corruption on the economy.)

Haven’t we learned a key lesson from the pandemic? Bad governance hurts the economy. If we keep on electing inept and visionless leaders — those incapable of curbing corruption or crafting a good and exciting economic strategy — then the country’s growth momentum will continue to falter. Reaching “upper-middle income” status by 2028 will also prove more of a moonshot. – Rappler.com

Dr. JC Punongbayan is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. In 2024, he received The Outstanding Young Men (TOYM) Award for economics. Follow him on Instagram (@jcpunongbayan).

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