PHILIPPINE ECONOMIC growth may have picked up in the first quarter thanks to cooling inflation and faster government spending ahead of the election ban, a BusinessWorld poll showed.
The Philippines’ gross domestic product (GDP) is expected to have grown by 5.8% in January to March, according to a median forecast of 15 economists and analysts polled by BusinessWorld, picking up from the revised 5.3% in the fourth quarter of 2024.
However, it would be a tad slower than the 5.9% growth recorded in the first quarter of 2024.
It would also fall short of the government’s 6%-8% full-year growth target range.
The Philippine Statistics Authority is set to release the preliminary first-quarter GDP data on May 8.
The economy’s growth may have been supported by easing inflation and higher government spending ahead of the election ban on the release of public funds that started on March 28.
“Household consumption could be supported by cooling inflation while government frontloaded spending also likely lifted economic activity,” said Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co.
Inflation averaged 2.2% in the first quarter, as food and transport costs rose at a slower pace. In March alone, inflation rose to 1.8%, the slowest in five years, or since the 1.6% logged in May 2020.
“Private consumption growth also likely edged up due to strengthening purchasing power from a persistent decline in headline inflation,” Euben Paracuelles, an analyst at Nomura Global Markets Research, said.
Household final consumption expenditure, which accounts for over 70% of the economy, grew by 4.7% in the fourth quarter, slowing from 5.2% in the third quarter and 5.3% in the same quarter in 2023.
“[First-quarter GDP] is driven by higher consumption and government spending especially on infrastructure. This is particularly true as fiscal efforts support growth,” said Reinielle Matt M. Erece, an economist at Oikonomia Research and Advisory, Inc.
Government expenditure climbed by 23.89% in the first quarter to P1.477 trillion, already accounting for nearly a fourth of the P6.2-trillion disbursement program this year.
Separate data showed state spending on infrastructure jumped by 23.1% to P148.3 billion in the January-to-February period, as agencies ramped up disbursements before the ban.
“The (GDP) improvement is in part due to low base effects but also reflects election-related spending and stronger public sector capex disbursements,” said Mr. Paracuelles.
Election-related spending is also expected to have spurred faster consumer expenditures, as the 90-campaign period for national candidates began in February. The campaign period for local candidates started on March 28.
“Election spending should provide the lift [to consumption], with government spending to continue,” said Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co.
In previous election years, the Philippines posted strong GDP growth rates — 7.1% in 2016 (from 6.3% in 2015), and 7.1% in 2022 (from 5.7% in 2021).
Meanwhile, rate cuts by the Bangko Sentral ng Pilipinas (BSP) may have also lifted investment activity.
“Another factor is low rates influencing improved private investments,” Sun Life Investment Management and Trust Corp. economist Patrick M. Ella said.
The BSP cut rates by 25 basis points at each of its last three meetings since August 2024, bringing the benchmark to 5.75% by yearend. It unexpectedly kept rates steady at its February meeting.
TRADE TENSIONS
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, said lackluster business sentiment in the first quarter was a drag to overall spending and growth, as companies braced themselves for the US tariffs.
“Amid persistent global trade uncertainties, the question is whether the expected first-quarter GDP growth that will outpace second half of 2024 gains, is the best we can attain for the year. We hope to see more BSP rate cuts that will mitigate the high real interest rate setting, and bolster growth resiliency amid Trump 2.0 tariff hike,” Mr. Asuncion said.
Analysts also said growth may have been affected by the wider trade deficit in the first quarter.
“We believe negative growth factors were widening of trade deficit on imports outpacing exports and sluggish capital formation amid declining business sentiment,” Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said.
In the first quarter, the trade deficit stood at $12.71 billion, widening by 12.8% from the $11.26-billion gap a year ago. Exports expanded by 5.9% to $19.27 billion in the first three months of 2025, while imports rose by 8.4% to $31.98 billion.
HSBC economist for ASEAN Aris D. Dacanay said goods exports may have improved in the first quarter as businesses frontloaded their purchases to build up inventory ahead of the US tariff announcement.
“The Philippines is relatively better insulated than others in Asia from the chaotic US tariff policy and expected weakness in global goods trade because domestic consumption is a decent share of GDP,” Katrina Ell, Moody’s Analytics director and head of Asia-Pacific economics, said.
In February, US President Donald J. Trump began making tariff threats against Mexico, Canada and China, as well as other trading partners. Some of the tariffs were implemented, while others were paused.
Mr. Trump announced a baseline 10% tariff which was imposed on all of its trading partners, as well as higher “reciprocal tariffs” in April.
The US slapped a 17% reciprocal tariff on the Philippines, the second lowest in Southeast Asia. However, Mr. Trump paused the steeper levies until July to allow countries to negotiate with the US.
For the rest of the year, Mr. Erece said he expects economic growth to be “negatively affected” when the higher tariffs take effect.
“This will largely impact exports unless trade negotiations with the US are successful. Investments may also be impacted especially FDIs as investors worry where to put capital, manufacturing plants, and money amidst uncertainty,” Mr. Erece said.
“We still believe that these worries will be offset by faster consumption and infrastructure.” — M.M.L.Castillo
