Philippines' GDP growth in Q2 pegged at faster 5.6%

MANILA, Philippines — The Philippine economy may have grown at a faster pace in the second quarter, as benign inflation likely boosted consumption at a time when an election-related ban on disbursements may have weighed on government spending.

Gross domestic product (GDP) likely grew 5.6 percent year-on-year in the three months through June, based on the median estimate of 15 economists surveyed by the Inquirer. GDP measures the total value of goods and services produced within the country.

If realized, the figure to be reported by the Philippine Statistics Authority on August 7 would exceed the 5.4 percent growth recorded in the first quarter. However, it would still represent a sharp slowdown from the 6.5-percent expansion logged in the same period last year.

READ: Faster 5.6% Philippine GDP growth seen in Q2

The estimate would land near the lower end of the Marcos administration’s downgraded full-year growth target of 5.5 to 6.5 percent for 2025. Emilio Neri Jr., lead economist at Bank of the Philippine Islands, projected above-consensus growth of 5.8 percent, citing resilient household consumption as a key driver.

On the flip side, Neri said government spending may have exerted a drag on growth.

“On the demand side, household consumption likely remained the main growth driver, supported by election-related spending, easing inflation (particularly the sustained decline in rice prices) and continued strength in consumer lending,” Neri said.

Government spending

“However, this upside could be partially offset by slower headline government spending and infrastructure expenditures, constrained by the election spending ban,” he added.

A pickup in second-quarter growth would signal a modest rebound for an economy that faced headwinds from weak business sentiment earlier in the year, amid global trade uncertainties. In the first quarter, gross capital formation—the investment component of GDP—slowed to 4 percent, while net exports dragged growth by around 2 percentage points.

In national accounts, exports add to GDP while imports are deducted. Aris Dacanay, economist at HSBC, said stronger US demand for Philippine goods ahead of tariff changes may have helped offset some of the external drag.

“With importers abroad frontloading their orders in anticipation of higher US tariffs, goods exports likely grew over the course of the quarter as exporters—mostly in electronics and agriculture—rode the global tailwinds of last-minute front-loading,” said Dacanay, who forecasts second-quarter growth at 5.6 percent.

Still, not all analysts are optimistic. Gareth Leather, economist at Capital Economics, expects GDP growth to have slowed to 5 percent last quarter, citing persistent external headwinds.

“Looking ahead, we think exports will continue to struggle amid softer global demand growth,” he said.

“But consumption should fare better as the boost from low inflation and the lagged impact of looser monetary policy continues to feed through to activity,” he added. 

(2025/08/04-02:13)

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