DBM chief optimistic holiday spending will lift Q4

By Aubrey Rose A. Inosante, Reporter

THE PHILIPPINE economy is expected to accelerate in the fourth quarter, driven by holiday spending, exports, and a rebound in investment activity, Budget Secretary Amenah F. Pangandaman said, but flagged risks from natural disasters.

However, some analysts are skeptical of a fourth-quarter boost as state spending and household consumption are dampened by the corruption scandal.

Ms. Pangandaman, who also chairs the Development Budget Coordination Committee, said the government sees gross domestic product (GDP) growth picking up in the final stretch of 2025.

“(This will be) driven by private holiday spending and supported by government programs, as well as growth in exports and capital outlays,” she told BusinessWorld in a Viber message on Monday.

The economy slowed to 4% in the third quarter from the 5.5% expansion in the second quarter and 5.2% a year ago. This came as the corruption scandal stalled public construction and dampened consumer and investor sentiment.

For the first nine months of the year, GDP growth averaged 5%, slower than 5.9% in the same period last year.

Ms. Pangandaman said she anticipates a rebound in gross capital formation, the investment component of the economy, in the fourth quarter, after it contracted by 2.8% in the third quarter.

“Private investments would be supported by favorable market conditions given lower interest rates, greater liquidity and availability of credit, and seasonal increases in demand for goods and services during the holidays,” the Department of Budget and Management (DBM) chief said.

Since August 2024, the Bangko Sentral ng Pilipinas has reduced its benchmark rate by 175 basis points (bps), bringing it to a three-year low of 4.75%.

At the same time, Fitch Solutions’ BMI said fourth-quarter growth may be driven by remittances and recovery from the recent spate of typhoons.

“We expect the recovery from storm season and strong remittances to drive faster growth in Q4, although tariff-related headwinds will drag on growth,” it said on Monday.

BMI also expects household consumption to pick up in the October-to-December period thanks to stronger remittances driven by a weaker peso and the frontloading of transfers ahead of the US 1% remittance tax starting January 2026.

The US will start imposing on Jan. 1, 2026 a 1% excise tax on cash-based remittances from US senders to recipients abroad.

However, BMI said this boost in remittances is expected to be temporary and will likely lead to a slowdown in 2026.

“Academic research has found that [for] every 1% increase in the cost of sending remittances, the amount remitted falls by around 1.6%. Remittances, therefore, are likely to drag on consumption growth into 2026, diminishing the positive effects of easier monetary policy,” it said.

BMI lowered its GDP growth forecast to 4.9% for 2025, but kept its 5.2% projection in 2026.

“The risks to our forecasts are tilted to the downside. The drag on government spending from the corruption probe could last beyond Q1 2026, particularly if sectors other than flood control are implicated,” it said, adding that slow remittance growth and tariff uncertainty will also remain key headwinds in 2026.

Meanwhile, Nomura Global Markets Research said it expects Philippine GDP growth to slide below 4% in the fourth quarter, citing “still-weak sequential momentum.”

“We believe the drag from the graft scandal in Q3 is just the start, with fiscal spending likely to worsen in the next three to four months. In addition, we continue to incorporate some spillovers on other components of domestic demand… broadening from household consumption to private investment spending,” Nomura said in a report on Monday.

“Our forecasts also continue to take into account the impact of the US tariffs, which pose significant headwinds to goods exports.”

Economy Secretary Arsenio M. Balisacan earlier said the economy must grow by at least 6.9% to hit the low end of the government’s 5.5%-6.5% full-year goal.

Nomura kept its full-year growth forecast at 4.7%, down from last year’s 5.7% and below the government’s target range. If realized, this would mark the slowest pace since the pandemic and trail regional peers like Indonesia.

For his part, IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa said there’s “little reason” to expect the economy to grow by nearly 7% in the fourth quarter, citing weak consumption, exports, and restrained public spending.

“There are no possible sources of any spending spurges — since 2023, household consumption has been weakening since the waning of the post-long lockdown rebound and likewise with exports because of high global uncertainty,” he told BusinessWorld in a Viber message.

“Government infrastructure spending is also unlikely to spike in the last quarter as officials avoid creating further paper trails from corruption-ridden and -vulnerable projects,” he added.

Mr. Africa said the government should stop obsessing with GDP growth targets and instead give “genuine attention to the quality of growth and whether this creates decent employment, raises wages, reduces poverty, reflects improving food security, and improves ecological resilience.”