Philippines posts worst economic growth since 2011

The 4.4% expansion was well below a June projection of 5.5-6.5%, which was already a downgrade that took into consideration the imposition of U.S. tariffs and "global uncertainties."

The full-year figure was the worst since a 3.9% rate in 2011 -- though it contracted 9.5% in 2020 during the Covid crisis.

The data also showed just 3.0% growth in October-December, compared with 5.3% the year before, marking the second straight quarter that targets have been missed.

Economic Planning Secretary Arsenio Balisacan told reporters Thursday that a spiraling scandal over bogus infrastructure projects had weighed heavily on short-term growth.

"Admittedly, the flood corruption probe scandal weighed on business and consumer confidence," Balisacan said of alleged fraud that is believed to have cost taxpayers billions of dollars.

Construction spending has cratered since the scandal over bogus flood control projects erupted in July, when President Ferdinand Marcos made it the centerpiece of a speech. Scores of officials, lawmakers and construction firm owners have now been implicated.

Balisacan said Thursday that even normal figures from the sector would have improved 2025's growth numbers dramatically.

"If public construction (had not been) flat, GDP for 2025 would have actually increased from 4.4 to 5.5%," he said of a 0.24% dip for the year.

"Weather and climate-related disruptions" had also taken a toll, he said, with missed work days and school closures amid heatwaves and nationwide flooding contributing to depressed domestic demand.

Balisacan predicted that reforms being enacted due to the infrastructure scandal would lead to a bounce back in 2026.

"The resulting measures and governance reforms are necessary to strengthen accountability, improve project quality, ensure better value for scarce public resources, and build our capacity for faster and more sustainable growth in the years ahead," Balisacan said.

But London-based analysts Capital Economics, noting a 18.4% plunge in public investment, warned growth would likely remain soft, while predicting interest rate cuts in the near term.

"Overall, we expect the economy to grow by around 4.5% in 2026, which would remain below trend and consensus (5.3%)," said Asia economist Shivaan Tandon.

"With inflation set to stay low, we think the central bank has scope to deliver a couple more interest rate cuts in the coming months."