Philippine economy posts 5.4% growth in Q1 amid global uncertainty

“While this pace falls short of our initial expectations, it reflects developments from the broader global context of tempered economic activity amid persistent uncertainties,” Department of Economy, Planning, and Development (DEPDev) Undersecretary Rosemarie G. Edillion said at a May 8 press briefing.

Among Asian countries that have reported their first-quarter GDP, the Philippines ranked second, matching China, behind Vietnam’s 6.9 percent, and ahead of Indonesia (4.9 percent), Malaysia (4.4 percent), and Thailand (projected at 2.8 percent).

By value, the country’s GDP in the first quarter stood at P6.59 trillion, up 7.6 percent, or nearly half a trillion, from P6.12 trillion in the same period last year.

Wholesale and retail trade, financial services, and manufacturing were the main growth drivers, posting gains of 6.4 percent, 7.2 percent, and 4.1 percent, respectively.

On the demand side, household spending grew by 5.3 percent, slightly from 4.7 percent in the fourth quarter of 2024. Government spending surged by 18.7 percent, while capital formation grew by four percent.

“For the entire year of 2025, there will still be substantial growth from government final consumption expenditure,” Edillon said, noting that regular government programs will continue, but spending is expected to rise in sectors such as advertising, publishing, and paper production due to election-related activities.

Below target

However, this growth was almost stagnant and markedly slower than the 5.9 percent expansion seen in the first quarter of 2024. It also fell significantly short of the government’s six percent growth target to eight percent.

Edillon said that net exports, which dropped by 19.8 percent, substantially impacted the first quarter performance. However, she also noted that exports of goods and services were strong, growing by 6.2 percent.

“We’re seeing that it’s not really the trade war itself, but rather the anticipation of uncertainty in global trade. As a result, there were significantly more imports, with import spending front-loaded in the first quarter,” she explained.

Citing the escalating global trade uncertainties, Edillon said that the first-quarter growth was not disappointing.

“Actually, at the beginning of the year—as early as January—we already saw a lot of uncertainty. But this first quarter was actually not quite a disappointment,” Edillion said.

Edillion argued that the first-quarter figure has “really many layers to it and a lot of it is born out of the uncertainty,” noting that local businesses have also become more cautious of the external threats.

“We saw that businesses have also employed strategies in anticipation of more uncertainty,” Edillon said.

“But there are things that also provide us with optimism. For instance, the investments in durable equipment—which also make up a huge bulk of imports—are really on capital equipment.”

Revisiting targets

According to Edlillion, for the Philippine economy to achieve the lower end or six percent of the full-year target, it must expand by 6.2 percent for the rest of 2025.

She has no answer as to whether the ambitious growth target band remains within reach, but added that this is “within the range of possibilities.” The Cabinet-level Development Budget Coordination Committee (DBCC) will meet on May 9 to discuss any potential revision considering the latest economic data.

“Actually, the DBCC will be meeting next week to review the first-quarter numbers and also to revisit our assumptions for the rest of the year,” Edillon said.

Edillon told reporters on the sidelines of the press briefing that the government and private election-related spending, including campaign sorties and candidate support, were mostly concentrated in April—the start of the second quarter.

This means that the first quarter growth may not fully mirror the boost in election spending, thus the modest expansion. — Derco Rosal