The Philippine economy is projected to accelerate in the final quarter of this year, according to a new analysis from the state-run think tank. However, experts also warn that full-year growth will likely miss government targets due to pressing institutional challenges.
A Stronger Quarter, But A Sobering Year
In a recently released discussion paper titled Macroeconomic Prospects of the Philippines in 2025 to 2026: Restoring Confidence amid Glocal Transitions, researchers from the Philippine Institute for Development Studies (PIDS) forecast a five percent GDP growth for the fourth quarter of 2024. This projected pace marks a notable rebound from the four percent expansion recorded in the third quarter—which was, in fact, the slowest growth rate in four years.
Previously, Department of Economy, Planning and Development Secretary Arsenio Balisacan linked the third-quarter slowdown to a sharp contraction in public construction. This decline coincided with high-profile investigations into alleged corruption within certain flood control projects.
Growth Targets Expected to Fall Short
Consequently, despite the anticipated Q4 rebound, the overall economic picture for 2024 remains below official ambitions. Growth from January to September averaged five percent, placing it beneath the government’s target range of 5.5 to 6.5 percent for the full year.
Looking ahead, PIDS maintains a cautious outlook. For the full year of 2025, the institute expects the economy to expand by approximately five percent—a figure again below the government’s goal. Furthermore, their projection for 2026 is a 5.3-percent GDP growth, which is lower than the official six to seven percent target.
Key Drivers and Critical Constraints
On a positive note, PIDS identifies several sectors poised to support growth through 2025 and 2026. These include continued (though moderating) domestic demand, sustained infrastructure spending, and resilient performance in the IT-BPM, transport, tourism, and services industries.
Nevertheless, the report issues a stark warning about significant headwinds. The authors highlight that the nation faces profound political and institutional challenges that threaten its economic potential. “The true constraint lies in confidence,” the paper states. “There is a deep erosion of trust in governance, policy credibility and the rule of law, exacerbated by the recurring spectacle of corruption scandals that continue to dominate public discourse.”
Specifically, governance issues and perceived inconsistent responses to typhoons and extreme weather events have weakened both domestic and investor confidence. This environment, the authors argue, underscores an urgent need to restore credibility, accountability, and effective leadership. In fact, these institutional weaknesses may even delay the country’s entry into the upper-middle income category.
A Call for Foundational Reform
To unlock the Philippines’ full growth potential, the PIDS researchers emphasize that the economy can no longer rely solely on household consumption or favorable demographics. A deeper transformation is required.
“Restoring credibility, integrity and trust in governance is no longer optional; it is the foundation of sustained growth that must be earned through structural transformation, institutional credibility and shared reform ownership,” they conclude.
As a critical first step, the authors advocate for penalizing corrupt officials and their accomplices without exception as an immediate priority. The ultimate goal, they affirm, is to “build an economy that is resilient to shocks, free from corruption, inclusive in opportunity and future-ready, which is the very spirit of AmBisyon Natin 2040.”
