On growth in 2025, the CPBRD study, and the RPA UPSE-PDE lecture

Today I will discuss three related topics, so we go straight to the numbers.

Last week the Philippine Statistics Authority (PSA) released the country’s GDP performance in the fourth quarter (Q4) and that of the full year 2025. It was a disappointing 3% in Q4 and thus, the full year growth was only 4.4% — the lowest since 2012, excluding the -9.5% contraction during the lockdown of 2020.

I checked the Q4 2025 data of our Asian neighbors. It turns out that our GDP was actually high compared to other East Asian nations except for Malaysia, Singapore, and Indonesia. It was also higher than all major economies of Europe and America except Ireland (see Table 1).

The UK has released no Q4 2025 data yet, but its GDP growth in recent years was low — 0.4% in 2023, 1.1% in 2024, and 1.5% in Q1-Q3 2025. These numbers are bordering on degrowth and deindustrialization like those of Austria, France, Germany, Italy, etc.
Thus, our 4.4% growth last year is still modest growth and hence, not a justification for economic pessimism. Our recent growth above 5% was pulled down by the continuing infrastructure corruption scandal that blew up last July. The growth slowdown is a necessary correction mechanism so that corruption and overspending can be checked. The detractors who dismiss the Philippines as “unworthy” of investments are using emotion and not reason in their arguments.

THE CPBRD STUDY
The Congressional Planning and Budget Research Department (CPBRD), the economic think tank of the House of Representatives, produced a beautiful research report, “The Limits of Expansionary Government Spending: An Initial Exploration of the Fiscal Multiplier in the Philippines,” written by David Joseph Emmanuel Barua Yap, Jr., Rutcher M. Lacaza, Jhoanne E. Aquino, and Edrei Y. Udaundo. The 30-page Discussion Paper No. 3 was published in January, just days before the PSA released the Q4 GDP data.

The paper examines fiscal multipliers — pesos of GDP generated or contracted per peso of expenditure. They used the Vector Autoregression (VAR) model estimated through quarterly data from 2010 to 2025, and focused on government expenditures, household consumption, gross capital formation or investments, and GDP.

Their research showed that every P1 of government expenditure generated only P0.15 of GDP in Q0, then reduced the GDP by P0.42 in Q1, and then a P1.70 reduction in GDP for the year, suggesting crowding-out effects.

For every P1 of household expenditure, the GDP increased by P1.44. And for every P1 in investment or gross capital formation, the GDP increases by P0.64. The CPBRD also correctly predicted that Q4 growth would be 3%. Their prediction of 2026 GDP growth is 4.62% in Q1 and 4.14% for the full year (see Table 2).

The report’s implications? If we want higher growth, we should cut government spending and borrowings, cut taxes to promote more household spending, and promote more investment and businesses. This was sensible research with sensible proposals.

The CPBRD used to be called the Congressional Planning and Budget Office (CPBO). I worked there as a junior economist from 1991-1999 before I joined the private consulting Think Tank, Inc. of former Congressman Gary Teves in 2000, before he became Finance Secretary.

THE 4TH RPA ANNUAL LECTURE
The 4th Ruperto P. Alonzo (RPA) memorial lecture will be held this coming Friday, Feb. 6, at 3 p.m., at the UP School of Economics in Diliman, Quezon City. It is sponsored by the UPSE Program in Development Economics (PDE) Alumni Association and the Philippine Center for Economic Development (PCED).

The main speaker is the acting secretary of the Department of Budget and Management, Rolando U. Toledo, who is a PDE alumnus from batch 29. The most recent Budget and Management Secretary, Amenah F. Pangandaman, is a PDE alumna from batch 33. The theme of the lecture is “Protecting Fiscal Integrity: Fighting Corruption in Public Finance.”

The two discussants after Mr. Toledo’s presentation will be Dr. Cielo Magno, UPSE faculty member and former Finance undersecretary, and Dr. Romulo Emmanuel “Jun” Miral, Jr., Deputy Secretary General of the House of Representatives and head of the CPBRD. The moderator will be Dr. JC Punongbayan, also a UPSE faculty member.

Prof. Ruping Alonzo was a beloved faculty member of UPSE for 45 years (1968-2013), the Director of PDE for many years, occasional drinking buddy of our PDE batch 33, and my wedding godfather. His wife, Zorayda Amelia “Mel” Alonzo who was former President and CEO of Pag-Ibig Fund, will give the closing remarks after the lecture.

The lecture is free, open to the public. So come dear readers, and catch these three brilliant officials discuss public finance intelligently and quantitatively.

Bienvenido S. Oplas, Jr. is the president of Bienvenido S. Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers. He is an internationa fellow of the Tholos Foundation.