OECD trims Philippines growth forecast

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December 4, 2025 | 12:00am

2025 expansion seen at just 4.7%

MANILA, Philippines —   The Organization for Economic Cooperation and Development (OECD) has downgraded its growth forecasts for the Philippines for this year and the next amid a flood control controversy that has dampened investor sentiment.

In the OECD Economic Outlook December 2025 report released yesterday, the OECD said that the Philippine economy is projected to grow by 4.7 percent this year and by 5.1 percent in 2026.

These forecasts are lower than the OECD’s previous growth forecasts for the Philippines of 5.6 percent for this year and six percent for 2026.

The new growth projections are also below the government’s 5.5 to 6.5 percent growth target for this year and six to seven percent growth goal for 2026.

For 2027, the OECD expects the Philippine economy to grow by 5.8 percent, also lower than the government’s six to seven percent target for that year.

“Private consumption is supported by a strong labor market and contained inflation, but investment has weakened as the execution of public infrastructure projects has slowed on the back of a corruption scandal linked to public works,” OECD said.

After expanding by 5.4 percent in the first quarter and by 5.5 percent in the second quarter, Philippine economic growth slowed in the third quarter to a four-year low of four percent.

The government attributed the slowdown to a contraction in public construction due to flood control corruption issues that have also affected consumer and investor sentiment.

From January to September, the economy grew by an average of five percent, below the growth target for this year.

The OECD said it expects growth to be supported by robust household consumption, strong labor market performance, low inflation and improving financing conditions.

“Inflation is anticipated to fall to 1.6 percent in 2025, before gradually reverting to the mid-point of the central bank’s two to four percent target band as favorable food and energy price shocks fade and domestic demand recovers,” the OECD said.

Headline inflation or the rate of increase in consumer prices held steady at 1.7 percent in October. This brought the average inflation from January to October to 1.7 percent, below the government’s two to four percent target.

With inflation still below target and growth projected to stay slightly below trend, the OECD expects further monetary policy easing, with policy rates declining to 4.25 percent in 2026.

Since the central bank started its easing cycle in August last year, it has lowered the key policy rate from 6.5 percent to 4.75 percent in October this year.

“Investment is expected to recover modestly over the coming quarters as borrowing costs decline and public investment picks up, but slower export momentum amid ongoing external uncertainties and softening global demand may temper gains,” the OECD said.

It said risks to the outlook are tilted to the downside, with a more persistent than expected weakness in public investment amid tighter corruption controls, and weaker investor confidence likely to weigh on domestic demand.

On the upside, it said the easing of foreign investment rules could help encourage investments.

The OECD said the Philippines could build on recent reforms that aim to strengthen market competition by further simplifying and harmonizing regulations in the energy, telecommunications and transport sectors.

“Streamlined regulatory frameworks in these industries would help lower entry barriers and attract more private investment,” the OECD said.

In addition, it said reducing non-wage labor costs and increasing flexibility in labor regulations would help raise productivity and improve job stability.

Earlier this week, Department of Economy, Planning and Development (DEPDev) Secretary Arsenio Balisacan said achieving the growth target this year is “very unlikely” amid challenges such as global uncertainties, disasters and governance issues.

Amid these challenges, he said the DEPDev is coming up with an executive report that will include economic analysis, policy options and proposals to protect the economy’s gains and promote inclusive growth.