PH ECONOMY GROWS BY 5.4 IN Q1 2025,
FASTER THAN PREVIOUS QUARTER

The Philippine economy grew by 5.4% in the 1st quarter of 2025, slightly above the 5.3% expansion in Q4 2024 but below the 5.9% growth in Q1 2024. This quarter’s GDP growth of 5.4% fell short of the median estimate of local economists at 5.8%. This also falls short of the government’s 6-8% full-year growth target range.

On the demand side, Government Spending expanded by 18.7% a significant increase from 9.0% in the previous quarter. This growth was largely driven by frontloaded infrastructure projects, expanded social protection programs, and increased public sector spending in the lead-up to the elections. Household spending grew by 5.3%, up from 4.7% last quarter, supported by easing inflation that improved consumer purchasing power and sustained remittance inflows. Investment, measured in gross capital formation, rose by 4.0%, though this marks a slowdown from 5.5% in the previous quarter, suggesting some caution among businesses in capital expenditure amid global uncertainties including tariffs imposed by the US on Philippine exports, geopolitical tensions, and supply chain disruptions. Furthermore, exports of goods and services increased by 6.2%, while imports of goods and services grew by 9.9%.

On the supply side, the Services sector expanded by 6.3% and continues to drive overall growth. This reflects strong consumer demand, increased business activity, and continued diversification in finance, healthcare, and information technology. Industry expanded by 4.5%, indicating a good performance in manufacturing, construction, and utilities supporting economic activity. On the other hand, Agriculture posted a 2.2% growth, largely attributed to favorable weather conditions that supported crop production.

According to NEDA Undersecretary Rosemarie G. Edillon: “A concise description of this first quarter economic performance is ‘a measured start’…While this pace falls short of our initial expectations, it reflects developments from the broader global context of tempered economic activity amid persistent uncertainties.” The Marcos administration previously had a goal for the Philippines to be classified as an upper middle income country by 2025. However, the forecast has been recently adjusted by the World Bank, noting that this may be possible by 2027. According to Gonzalo Varela, lead economist and program leader at the World Bank, “The more likely scenario is that it will take a couple of years. It won’t be 2026. It’s more likely that it may be 2027.” Both the World Bank and the ADB have adjusted their respective economic outlooks due to the Trump administration’s recent issuance of tariffs where the Philippines received 17%. However, NEDA Secretary Balisacan has previously stated that he sees “minimal” effects of the 17% tariff imposed by the United States on the Philippines; he noted that “the reason for that is that we had some of the trade diversion benefits because we had lower tariffs (than) our neighbors.”

However, Usec. Edillon emphasized the need for the passage of economic reforms in the midst of an increasingly uncertain global economy: “We must hasten the passage of key economic reforms that will strengthen the governance of critical industries like water, electricity, and telecommunications; [and] open up the market to greater private sector participation…”