Faster than Q2 and yr-earlier, with milder inflation, calmer weather
The Philippine economy is projected to grow at a faster rate of 5.8 percent in the third quarter, compared with the preceding quarter and the year-earlier, supported by milder inflation and fewer typhoons, the University of Asia and the Pacific (UA&P) said in its latest Market Call.
The projected third-quarter growth in gross domestic product (GDP) is faster than the second quarter’s 5.5 percent and the third quarter 2024 rate of 5.2 percent.
UA&P said strong household consumption and steady infrastructure spending will drive this year’s recovery, though housing construction is likely to lag unless the Bangko Sentral ng Pilipinas (BSP) delivers deeper rate cuts.
Inflation eased to 0.9 percent in July—a six-year low, second only to October 2019’s 0.6 percent—keeping year-to-date inflation at 1.6 percent.
The peso, however, faces pressure, with UA&P warning it could weaken past 57.5 to the dollar if the US-Philippine rate gap narrows further and the trade deficit persists.
The bond market outlook is brighter.
UA&P said the Bureau of the Treasury’s P504 billion Retail Treasury Bond sale in August leaves only 5.8 percent of its 2025 domestic borrowing target unmet, allowing the government to lean more on $4–5 billion in foreign debt.
Higher-than-market RTB yields, it added, should spur trading and profits.
“The BSP has indicated policy rate cuts of 50 basis points for the rest of the year as inflation pressures remain muted,” the report said. But much depends on how far the central bank is willing to decouple from the US Federal Reserve.
Philippine sovereign spreads over Treasuries, UA&P noted, are already near historic lows.
In equities, a rebound is expected after September’s low-liquidity “ghost month.” UA&P said sentiment could strengthen further if the BSP delivers an off-cycle cut unmatched by the Fed and if third-quarter GDP growth, due in November, surprises on the upside.
“Regulatory issues, however, remain as threats to this view,” it cautioned.
The UA&P is a private university in the Philippines that traces its beginnings to the Center for Research and Communication (CRC), which was established in 1967 as a private think-tank that conducted economic and social research.
The Philippine government has lowered its economic growth target for full-year 2025 to a range of 5.5 percent to 6.5 percent from an earlier forecast of 6 to 8 percent.
Reuters in an earlier report quoted the budget secretary as saying the government has also narrowed its growth goals for 2026 to 2028 to reflect global uncertainties stemming from tensions in the Middle East and shifts in US trade policies.
