Political uncertainty may stall Philippine growth — Fitch

PHILIPPINE economic growth is expected to remain within target this year, although global trade woes and domestic political uncertainty may cloud the outlook, Fitch Ratings said.

“We expect the Philippines’ economy to expand by 5.6% in 2025, broadly in line with 2023-2024, fueled by the traditional growth drivers of large public infrastructure investments, services exports and remittance-funded private consumption,” Fitch Ratings said in a peer credit analysis released Monday.

The credit rater maintained its Philippine gross domestic product (GDP) projection at 5.6% for this year, within the government’s 5.5-6.5% target.

“Private demand should be supported by easing inflation and interest rates,” Fitch added.

Headline inflation picked up to 1.7% in September, faster than the 1.5% in August but slower than the 1.9% clip a year ago. This brought the year-to-date inflation to 1.7%, matching the Bangko Sentral ng Pilipinas’ (BSP) full-year forecast.

Earlier this month, the BSP trimmed its key policy rate by 25 basis points (bps) to a three-year low of 4.75%. It has so far reduced borrowing costs by a total of 175 bps since August last year. 

“However, domestic political uncertainty could affect investment, with allies of President Ferdinand Marcos doing worse than we expected in the recent midterm elections and a recent corruption scandal,” Fitch said.

Recently, several Public Works officials, private contractors and lawmakers have been linked to multibillion-peso corruption involving government flood control projects.

“Global trade tensions will likely drag on growth, in particular indirectly through weaker global demand,” Fitch added.

At the same time, Fitch Ratings said its “BBB” rating and “stable” outlook for the Philippines, which it last affirmed in April, reflects the country’s strong medium-term growth prospects.

“The ‘BBB’ rating and ‘stable’ outlook reflect the Philippines’ strong medium-term growth, which supports a gradual reduction in government debt/GDP, and the large size of the economy relative to ‘BBB’ peers,” it said. “The rating is constrained by low GDP per head, despite an upward trend.”

In the first half, the Philippine economy grew by an average 5.4%, slower than 6.2% seen in the same period last year.

For his part, Department of Budget and Management (DBM) Undersecretary and Principal Economist Joselito R. Basilio said third-quarter GDP will likely remain within target, driven by private consumption.

“(The GDP is) most likely on target,” he told reporters on the sidelines of the 2025 Fiscal Policy Conference on Monday. “The target range is low, right? So, it can be reached very easily,” he added referring to the 5.5-6.5% government target.

The third-quarter GDP data will be released on Nov. 7.

Mr. Basilio said that private consumption might have picked up in the third quarter amid easing inflation and interest rates.

“So, maaasahan natin ngayon ’yung private sector driven growth (So, we can now rely on private sector-driven growth),” he added.

Mr. Basilio said he expects GDP growth to remain on target until yearend as the government plans to boost its spending in the coming months.

The Development Budget Coordination Committee is scheduled to meet between late November to early December to review its macroeconomic targets, he added.

‘CORRUPTION KILLS GROWTH’
Meanwhile, GlobalSource Partners’ analysts said massive corruption in flood control projects have weighed on Philippine economy, preventing it from growing over 6%.

“These funds — siphoned through fraudulent contracts and padded budgets — could have built schools, improved hospitals, and created up to 266,000 jobs. The resulting drag on productivity meant economic growth of 5.5-5.7%, when the economy could have expanded closer to over 6%,” GlobalSource country analysts Diwa C. Guinigundo and Wilhelmina C. Mañalac said in an Oct. 23 commentary.

Finance Secretary Ralph G. Recto earlier said the economy may have lost up to P118.5 billion between 2023 and 2025 due to these anomalous projects.

“The moral indictment is clear: corruption kills growth, weakens resilience, and erodes trust. When infrastructure becomes a source of private enrichment rather than public service, the entire development agenda collapses,” they added.

For a developing country like the Philippines, they said good governance is an “economic necessity,” not a “moral luxury.”

“Every peso lost to corruption is a peso withheld from productive investment. When public works are marred by inefficiency and fraud, they not only waste resources but also weaken the very foundations of inclusive growth: connectivity, productivity, and resilience,” they said.

“Unmasking corruption in public works, therefore, is more than an anti-graft exercise — it is a strategy for resilience and growth. In the final analysis, the most enduring infrastructure a nation can build is good governance itself: a system sturdy enough to withstand both earthquakes and temptations.” — Katherine K. Chan