By Aubrey Rose A. Inosante, Reporter

PHILIPPINE ECONOMIC GROWTH could pick up this quarter as household consumption likely improved amid easing inflation, and as exporters may have frontloaded production amid the pause in US reciprocal tariffs, an economist said.

ASEAN+3 Macroeconomic Research Office (AMRO) Country Economist Andrew Tsang said private consumption should still be stable in the second quarter amid easing inflation and the low unemployment rate.

However, he said it remains to be seen if private investment would see an increase in the second quarter, after a slowdown in the first quarter.

“Overall, I would expect the second-quarter (growth) to be similar to the first quarter but a bit better,” Mr. Tsang said in an interview on the sidelines of the BusinessWorld Economic Forum on May 22.

In the first quarter, gross domestic product (GDP) grew by a weaker-than-expected 5.4%, reflecting heightened uncertainty arising from the Trump administration’s tariffs. This was sharply slower than the 5.9% expansion in the same quarter last year, and below the government’s 6-8% target for the year.

“We consider both the tariff policy and also consider the Q1 data. Actually, before the tariff policy, we expect 6.3% (GDP growth for the Philippines). And then after the tariff policy and also the sentiment, we already expect there will be a change,” Mr. Tsang said.

“We expect this year, it would not be that bad, but still just below 6%,” he added.

However, Mr. Tsang said household consumption will rebound this year, as the inflation downtrend continues.

“That’s why we expect private consumption would be stronger this year. It’s the main driver of the recovery of the economy,” he said.

In the first quarter, household final consumption expenditure, which accounts for over 70% of the economy, grew by 5.3% annually from the 4.7% print in the fourth quarter.

Headline inflation slowed to 1.4% in April from 1.8% in March amid easing food and transport costs.

In the second quarter, Mr. Tsang said net exports may have gotten a boost as manufacturers likely ramped up production after the US paused the so-called reciprocal tariffs.

The US slapped the Philippines with a 17% reciprocal tariff, but this has been on hold until July. A 10% baseline tariff remains in effect.

“(Because of the 90-day delay in tariffs) they may tend to produce more in the second quarter to avoid any bad effects in the second half of the year,” Mr. Tsang said.

Mr. Tsang noted the external uncertainty has been affecting investor sentiment but expects growth in the second half to be faster compared to last year.

“But in the second half, we expect the number will be better because of the low base effect in the last year. Because last year in the second half, the main issue was the typhoon,” he said, referring to a series of typhoons that battered the country in the last few months of 2025.

The economy expanded by 5.3% in the fourth quarter of 2024, bringing full-year growth to 5.7% amid subdued consumption and lower farm output.

Mr. Tsang said Philippine economic managers are likely to trim the upper end of its 6-8% target for 2025 to make it a “more realistic forecast” considering the current global uncertainty.

The Development Budget Coordination Committee is scheduled to review its targets and macroeconomic assumptions at a meeting on May 26.

“I believe that the government still wants to target 6% or above. And 6%, basically it is the trend growth in our estimation. So, I would expect they will keep 6% but most likely the upper bound will be lowered a bit,” he said. 

Earlier, Department of Economic, Planning, and Development Secretary Arsenio M. Balisacan and Budget Secretary Amenah F. Pangandaman have insisted it is too early to abandon the 6-8% target.

The Philippine economy should grow by at least 6.2% in the remaining three quarters to reach at least 6% growth by yearend.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the second-quarter growth may have picked up to 6%, thanks to a boost from election spending, faster consumer spending, more jobs and increased government spending.

Reinielle Matt M. Erece, economist at Oikonomia Advisory and Research, Inc. said GDP is expected to expand by around 6% in the second half of 2025.

“I expect further rate cuts in June and maybe another one in the latter half of the year to further encourage spending and expansion,” he said.

The Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. signaled the possibility of two more rate cuts this year, with a 25-basis-point (bp) cut on the table as early as the June 19 meeting.

In April, the Monetary Board reduced benchmark interest rates by 25 bps to bring the policy rate to 5.5%.

US CREDIT RATING
Meanwhile, AMRO’s Mr. Tsang said the impact of the latest US credit rating downgrade on the Philippine economy may be minimal but warned it could affect government securities in the long term.

“To our expectation, it would not be making an impact to the Philippines because the credit rating is mainly affecting the US financial market. But given the financial market in the Philippines is a bit isolated from other global markets, the impact should not be that big,” he said.

Moody’s Ratings cut the US’ long-term issuer and senior unsecured ratings to “Aa1” from “Aaa,” revising its outlook to “stable” from “negative.”

“The BSP is mainly focusing on the local inflation dynamics. Given the inflation rate is very low now, I don’t think it would affect too much to the BSP interest rate cut, the pace of interest rate cuts. So, I would expect the impact would be very minimal,” Mr. Tsang said.