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On May 8, a few days before the midterm polls, the government released the latest statistics on the economy’s output. For the first quarter of 2025, production, which is measured by GDP or gross domestic product, grew by just 5.4%.
This means the economy still grew compared to the same period last year. The government called this “steady growth” and a “measured start” for 2025. But the more accurate description is that it’s disappointingly slow.
Forecasters’ median projection was 5.8%. And with the government’s own growth target of 6-8% for this year, growth will have to be over 6% in the last three quarters of 2025. In other words, chances are slim that the government will meet its own (already reduced) growth target.
More to the point, 2025 is an election year, and growth supposedly bumps up in the run-up to elections, what with the avalanche of campaign spending and infrastructure spending that should be done before the election ban. There’s also the usual exercise of vote-buying, which makes sure money finds its way to the hands of voters, increasing their purchasing power momentarily.
But Figure 1 below shows that 2025 gave us the lowest pre-election growth rate in more than two decades, or since the 2004 presidential elections that put back in power former president Gloria Macapagal-Arroyo.
Figure 1.
My sense is that the disappointing pre-election growth figures are a continuing sign of the fact that we are still reeling from the permanent scars wrought by the pandemic.
Figure 2 below shows that since 2023 we’re more likely to experience growth between 5% and 6%, whereas before the pandemic we usually got somewhere between 6% and 7%.
Figure 2
The primary reason for anemic growth is the continuing weakness of households’ consumption (Figure 3). Before the pandemic, private consumption usually contributed more than 4 percentage points to growth; after the pandemic, we haven’t experienced that since mid-2023.
Figure 3
In turn, the primary culprit here is the tremendous increase in prices since 2022, which dampened spending, especially on food.
While inflation has already dropped to just 1.4% in April (a five-year low), this doesn’t remove the fact that prices have skyrocketed since 2022 (lower inflation only means that prices are no longer rising as fast as before).
Meanwhile, spending on household items like electricity and water also slowed down, maybe as Filipinos started to cut down on costs, including basic necessities.
On the production side, agriculture continues to be a non-contributor to growth. The biggest contributor is still the service sector, followed by industry, but both these sectors are also considerably weaker than before the pandemic.
Figure 4 below shows the unsettling divergence of the Philippine economy from its pre-pandemic path. The latest data for the first quarter of 2025 only confirms that we’re definitely on a new path now, and the chances of converging back to the old path are practically nil.
Figure 4
Government officials were quick to mention that perhaps the slower-than-expected growth at the start of 2025 has something to do with the “persistent uncertainties” around the world (perhaps alluding to US President Donald Trump’s trade policies).
But remember that Trump did not declare his grand tariff offensive until April 2, which falls in the second quarter of the year. In the weeks before, Trump only mentioned a tariff offensive against Canada, Mexico, and China. If we’re so sensitive to these pronouncements, I shudder to think what the second quarter growth figures might look like.
The government also pointed out that while our growth trailed Vietnam and tied with China, we “outpaced” Indonesia, Malaysia, and Thailand. I’m not sure comparing ourselves with much more developed neighbors is useful at this point. The more informative comparison would be with Vietnam. Let’s ask ourselves: why couldn’t we match the amazing 6.9% growth of Vietnam in the first quarter of 2025? What are we doing wrong, and what are they doing right? (By the way, Vietnam is closer to us in development, but they’re richer than us now on a per-person basis.)
The Department of Economy, Planning, and Development (DepDev) said in a statement that, “Catch-up plans for delayed programs must be prioritized post-election, and capacity-building for newly elected officials should be expanded to ensure effective public service delivery.”
But there was no elaboration of why growth was anemic before the midterm elections. Also, they (conveniently?) omitted the fact that the budget shenanigans last year, ultimately approved by President Ferdinand Marcos Jr., defunded key infrastructure programs that could have spurred extra growth.
Vote wisely (for the economy)
We need to go beyond spin and hear a more honest assessment of the economy coming from our economic managers. Something clearly broke during the pandemic, and little is happening by way of reforms that could fix the economy especially in the long run.
This brings me to a quick note about the upcoming midterm elections on Monday, May 12. From the economic standpoint, there’s clearly a lot at stake.
But just judging from the latest survey results of “senatoriables,” I’m not too optimistic that the necessary reforms at the national level will take root. Honestly, what reforms can you expect from the likes of Bong Go, Lito Lapid, Camille Villar, and (god forbid) Willie Revillame?
At this point I’m not optimistic that we’ll elect the right leaders fit for the job of fixing the economy’s many ills in the next few years. Of course there are many reasons for our consistently poor electoral outcomes. But at any rate, don’t be surprised if it takes us a lot longer to catch up with our regional peers. – Rappler.com
JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. In 2024, he received The Outstanding Young Men (TOYM) Award for economics. Follow him on Instagram (@jcpunongbayan) and Usapang Econ Podcast.
