The Philippine economy likely gained more momentum in the second quarter of 2025, growing by an estimated 5.6% compared to 5.4% in the previous quarter, according to a report by the University of Asia and the Pacific (UA&P).
In its latest The Market Call report, UA&P attributed the improved pace to easing inflation and stronger employment, which likely fueled consumer spending. “We think GDP will accelerate to 5.6 percent year-on-year in Q2 from 5.4 percent in the prior quarter,” the report stated.
While still below UA&P’s earlier projection of at least 6%, the revised figure reflects a more cautious optimism amid external pressures and domestic recovery efforts.
Inflation, a major concern in previous quarters, showed signs of softening. Headline inflation dropped to 1.3% in May—marking the fourth consecutive month of decline—bringing the average to 1.9% from January to May, comfortably below the government’s 2-4% annual target.
Despite temporary global risks, such as rising oil prices due to the Israel-Iran tensions, UA&P maintains its full-year inflation forecast at 2.2%. Economists previously warned that escalating conflict in the Middle East could disrupt global supply chains and reverse the country’s progress in keeping prices stable.
On the jobs front, the labor market showed signs of strength. The number of employed Filipinos climbed to 48.67 million in April, up from 48.02 million in March, based on data from the Philippine Statistics Authority. UA&P believes this boost in employment is a key driver of consumer activity.
Government spending is also expected to play a bigger role moving forward. “We think NG (national government) will ramp up spending once again starting June as the election stoppages would have ended,” UA&P said, pointing to infrastructure expenditures and public projects as additional catalysts for growth.
Monetary easing may also give the economy further breathing room. Following the Bangko Sentral ng Pilipinas’ (BSP) 25-basis point cut in June, bringing the policy rate to 5.25%, another rate cut may be on the horizon. UA&P said it anticipates another cut in the third quarter if oil prices moderate.
Former BSP deputy governor and GlobalSource Partners analyst Diwa Guinigundo echoed this, saying, “With its nimble performance in terms of assessment and appropriate action, the BSP is expected to deliver another rate cut in the second half of 2025, actual data permitting.”
The Philippine government is targeting a 6% to 8% GDP growth for 2025. To reach even the lower end of that range, the economy must grow by at least 6.2% across the remaining three quarters—a tall but not impossible task, especially if current economic drivers hold.
