The Philippine economy grew 4.0 percent year-on-year in the third quarter of 2025, the slowest in nearly five years amid the disruption in public works caused by the flood-control controversy.
This growth was the weakest since the gross domestic product (GDP) shrank 3.8 percent in the first quarter of 2021. It was slower than 5.5-percent expansion in the second quarter and 5.2-percent growth in the third quarter of 2024.
This brought the average GDP growth in the first three quarters to 5.0 percent, below the government’s revised target range of 5.5 percent to 6.5 percent for 2025.
“The Philippine economy continues to grow, but the third quarter’s performance reminds us of the urgent need to address key challenges and strengthen our foundations for rapid, sustained and inclusive growth,” said Department of Economy, Planning and Development (DEPDev) Secretary Arsenio Balisacan.
Investments tumbled 2.8 percent in the third quarter from a year ago, while the industry sector posted a sluggish 0.7 percent during the period, data showed.
Balisacan noted a sharp contraction in public construction in third quarter due to stricter validation measures for the Department of Public Works and Highways’ (DPWH) civil works and the implementation of stricter requirements that delayed billings and disbursements for government projects.
Private construction remained respectable, but investment in durable equipment was subdued, he said.
“The main contributors to the third quarter 2025 year-on-year growth were wholesale and retail trade; repair of motor vehicles and motorcycles, 5.0 percent; financial and insurance activities, 5.5 percent; and professional and business services, 6.2 percent,” the Philippine Statistics Authority (PSA) said Friday.
All major economic sectors posted year-on-year growth in the third quarter. The agriculture, forestry and fishing sector expanded 2.8 percent; industry, 0.7 percent and services, 5.5 percent.
“On the demand side, household final consumption expenditure grew year-on-year by 4.1 percent in the third quarter of 2025,” the PSA said.
“Widespread cancellations of school, work and travel activities due to typhoons likely dampened spending. Moreover, consumer confidence may have been affected by the ongoing probes and discussions on government infrastructure spending, prompting many households to postpone purchases, especially durable goods,” said Balisacan.
“Compared to the second quarter, we also observe a lower disbursement of conditional cash transfers during the third quarter, which contributed to weaker consumption,” he said.
The government final consumption expenditure went up 5.9 percent. Exports of goods and services rose 7.0 percent, while imports of goods and services went up 2.6 percent. The gross capital formation declined 2.8 percent.
The gross national income, a broader measure of economic growth that also captures inflows from abroad, grew by 5.6 percent year-on-year in the third quarter of 2025.
The net primary income from the rest of the world posted year-on-year growth of 16.9 percent in the third quarter.
Balisacan said the government is implementing strategic interventions to bolster investor confidence and consumer trust, accelerating economic growth.
“We are fast-tracking social protection and financial aid for families and communities affected by the recent calamities. Agencies and LGUs are restoring infrastructure and services in key areas like Cebu and Davao, which were severely impacted by Typhoon Tino and the recent earthquake,” he said.
“We acknowledge that the class and work suspensions in the third quarter due to successive typhoons were more extensive than anticipated. These disruptions affected school, work, tourism and local commerce,” he said.
“While we may not be able to fully recover the economic losses within the year, we believe these are temporary setbacks. With sustained interventions and improved resilience, we expect the economy to rebound in 2026,” he said.
Balisacan said that for the medium to long term, “we are increasing our investments in disaster preparedness and adaptation to minimize disruptions in school, work and other economic activities, and more importantly, to protect the lives and livelihoods of the Filipino people.”
He said that despite these challenges, the government remains optimistic.
“The Philippines has strong macroeconomic fundamentals—low inflation, manageable fiscal deficit and public debt, stable currency and external balance, and a stable banking sector. On top of these, we have a young and resilient workforce and a reform-driven government,” he said.
“We are committed to rebuilding investor confidence and restoring public trust by upholding sound economic governance toward inclusive growth and raising further the potential of our economy by accelerating the momentum for transformative reforms,” said Balisacan.
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