Philippines: GDP growth inches up in Q1
Economy gathers pace but falls short of market predictions: According to a preliminary reading, GDP growth ticked up to 5.4% year on year in the first quarter of 2025 from 5.3% in the fourth quarter of last year and marking the best result since Q2 2024. That said, the expansion was weaker than markets had expected.
On a seasonally adjusted quarter-on-quarter basis, economic growth ebbed 1.2% in Q1, compared to the previous quarter’s 1.5% increase.
Q1 marks broad-based improvement in economy: Q1’s annual upturn reflected improvements in both domestic demand and exports.
Household spending accelerated to 5.3% year on year in the first quarter, which marked the best reading since Q4 2023 (Q4 2024: +4.7% yoy). Moreover, public spending soared 18.7% in Q1 (Q4 2024: +9.0% yoy), buoyed by a pre-election spending surge ahead of the 12 May midterms. Finally, fixed investment growth improved to 5.9% in Q1, following the 5.0% expansion in the prior quarter.
Externally, exports of goods and services growth accelerated to 6.2% year on year in the first quarter, marking the best performance in a year (Q4 2024: +3.2% yoy). However, imports of goods and services growth picked up to 9.9% in Q1 (Q4 2024: +2.7% yoy).
Economy to remain resilient in 2025: Economic growth is set to accelerate from Q1’s level in the remainder of the year, with private spending likely to remain a bright spot. Public stimulus measures, low inflation and ongoing interest rate cuts should encourage household consumption, outweighing downside pressures from a weakening external panorama.
Consequently, GDP growth should largely maintain its pace from 2024 in 2025 as a whole, in contrast to its ASEAN peers, which are set to decelerate. Domestic demand should strengthen from last year, and exports are still seen accelerating as the Philippines is less exposed to global protectionism than many of its neighbors. Weaker-than-expected external demand is a downside risk to GDP growth.
Panelist insight: EIU analysts said:
“We will maintain our forecast of 6.1% growth this year, accelerating from 5.7% in 2024, making the Philippines the only ASEAN economy with faster growth in 2025. The slightly weaker than expected first-quarter outturn means the risks to this view are to the downside. Nevertheless, the relatively small size of goods and service exports in the economy means that the negative effects from the global tariff shock on the Philippines will be minor, and domestic trends will be the main drivers of growth. Government spending, low inflation and monetary easing will provide positive tailwinds in this area.”
United Overseas Bank’s Julia Goh and Loke Siew Ting commented on their recent forecast downgrade:
“In view of a weaker-than-expected GDP outturn for 1Q25 and ongoing global trade threats, we slash our 2025 real GDP growth projection for the Philippines. […] The US’ sector-specific tariffs particularly on semiconductor will yield significant impact on the Philippines’ trade sector as electronic products is the country’s top export goods.”