The chief financial officer is optimistic about growth despite the decline in GDP for 2025

FINANCE SECRETARY Frederick D. Go is optimistic that the Philippine economy can recover and achieve the government’s growth targets after spending on fast, high-yielding capital.

Mr. Go said on Friday he was “hopeful” that gross domestic product (GDP) growth could reach the government’s target of 5%-6% this year after post-pandemic growth slowed sharply in 2025 due to the outbreak of a corruption scandal related to state infrastructure projects.

“I’m just saying that the whole year is the fourth quarter. We won’t get there in the first quarter,” he said on the sidelines of the ceremony.

Philippine GDP growth slowed to 3% in the fourth quarter from 5.3% in the same period last year and a revised print of 3.9% in the third quarter, the government reported on Thursday.

This was the slowest print in nearly five years or since the 3.8% contraction in the first quarter of 2021. Apart from the pandemic, this has been the worst since the 1.8% growth recorded in the fourth quarter of 2009, or during the Global Financial Crisis.

This put GDP growth for the full year 2025 at 4.4%, well below the government’s target of 5.5%-6.5%. This was slower than 5.7% in 2024 and was the weakest annual growth since 3.9% in 2011, including a 9.5% reduction in 2020 due to the pandemic.

This was below the average estimates of 4.2% and 4.8% for the fourth quarter and full year of 2025 GDP growth in the BusinessWorld survey.

“We are growing by 4.4%, so it is not the end of the world,” said Mr. Go. “But having said that, again, all the fundamentals that allow the economy to grow at 5.5% have not changed.”

“Nothing fundamental to the macroeconomics has changed. So, we have to get back to normal this year.”

He said they expect that public spending will decrease this year, adding that the officials have come together to remove the spending plan, and the five Departments that came out on top are the Department of Public Works, Education, Health, Agriculture and Transport.

“The five leading spenders were all present at that meeting, we agreed with them on how much money they will spend, how much money will be withdrawn.” I always coordinate with the DBM (Department of Budget and Management) regarding the release of these funds because we need them to distribute them in the economy.”

He added that they are still committed to fiscal prudence, which means spending money wisely while keeping the budget deficit under control.

“I sincerely believe that it’s not about the government spending more money every year – it’s about spending the same money, maybe less money, but using it for high quality and efficient use in projects that have a high multiplier effect.

Mr. Go added that he also met with President Ferdinand R. Marcos Jr. on Friday about economic problems.

RATE CUT

Following last year’s disappointing growth, the Bangko Sentral ng Pilipinas (BSP) may cut the rate for the sixth time in a row next month to boost the economy, Standard Chartered Bank said.

Standard Chartered economist and ASEAN (Association of Southeast Asian Nations) foreign trade analyst Jonathan Koh said the BSP has room for a 25 basis point (bp) cut amid sluggish growth and inflation.

“Therefore, since growth is soft, possibly at the lower end of the government’s forecast of 5-6% for this year, and since inflation is very bad, within the BSP’s target range of 2%-4%, I expect the central bank to cut rates,” he said at a press conference in Makati on Friday. “I’m looking to cut 25 points in February.”

Standard Chartered’s latest growth forecast for this year stands at 5.7%, but Mr. Koh said they may reduce this to around 5%. The government aims to grow by 5%-6% this year.

“I think sentiment has to change before we see real progress in terms of growth,” he said.

He added that a prolonged slowdown could give the BSP reason to extend its easing cycle and deliver another 25-bp rate cut to a final rate of 4%.

“I think if 2026 GDP growth is in danger of falling below 5%, I think that could lead to one more. [cut].”

The Monetary Board lowered the benchmark borrowing cost by a full 200 bps from August 2024, bringing the policy rate to 4.50%.

Last week, BSP Governor Eli M. Remolona, ​​Jr. he said further cuts are not certain, given the current economic conditions. He added that although they will consider GDP data, price stability remains their main concern.

Mr. Koh also said that they see the central bank reducing the reserve requirement ratio (RRR) to help increase money that may drive domestic demand.

“I think that’s on the table, maybe (in) the first half of the year,” he said.

The BSP cut the RRR for central banks by 200 bps to 5% in March last year. It also reduced the reserve ratio for digital banks by 150 bps to 2.5%, and for Trift banks it was reduced by 100 bps to 0%.

Meanwhile, Standard Chartered sees the peso trading at the P59-a-dollar level this year, with the continued weakness of the greenback and many foreign currencies of the Philippines preventing it from sliding to P60.

“I would say that in the Asian region, the peso is probably the least recognized currency,” said Mr.

Downside risks for the peso include weaker service exports as increased artificial intelligence and changes in US policies may affect the outsourcing sector, as well as slower growth in remittances.

Asked if the peso’s weakness would prevent the BSP from continuing to improve its policy stance, Mr. Koh said: “The way I see it now, my personal view, the risk of low growth outweighs the risk of inflation.”

The central bank controls the exchange rate to curb inflationary pressure as a weak peso means the country will have to spend more on imports such as oil, he said.

PUBLIC TRUST

Addressing governance issues will be key to reviving the Philippine economy, one analyst said.

“The problems facing the Philippines right now are twofold: public trust and taxes,” Alvin Joseph A. Arogo, first vice president and chief economist at the Philippine National Bank (PNB), said at the British Chamber of Commerce Philippines event on Thursday.

“It is important that Filipinos regain public trust so that strong growth can resume,” he said. “We can expect this weakness in social construction to continue into the third quarter, using previous historical experience.”

Even if full-year growth in 2025 falls well below market expectations and misses the government’s resumption target, this is “not a disaster,” Mr. Arogo, adding that he expects the economy to post a “strong recovery” in 2027.

“Growth at 4% is the envy of many advanced economies. So, just to look at it, 4% is slow in the Philippines, but it is not a disaster. The disaster is what happens in 2020, when the economy shrinks by about 10%,” he said.

“There is no need to panic, but some things have to change. And at least, even without structural changes, the change in sentiment alone will allow the Philippines to be able to post strong growth in 2027. Therefore, the year 2026 is a critical year, but it is possible to recover next year.” – Aubrey Rose A. Inosante, Justine Irish DP. Tabile, and Katherine K. Chan