Boom, bust trap

The utterly deflating 4.4 percent growth for the entire 2025 was blamed on the massive slash in public infrastructure spending, as many big-ticket projects were put under review.

The perception was that corruption scandals weighed on the economy, particularly in the second half of last year.

A bird, however, told Nosy Tarsee that this wasn’t the full picture of the dire situation some economists warn could return the country to being the “sick man of Asia.”

The economic think tank Ibon Foundation uncovered a deeper problem: A failed growth model that has been plaguing it since 2017.

Fourth-quarter gross domestic product (GDP) growth of 3 percent caused full-year 2025 growth to fall to 4.4 percent, which was not only slower than in 2024 but is consistent with the steady slowdown since the peak of 7.1 percent in 2016. 

Growth gradually slowed from 6.9 percent in 2017 to 6.3 percent in 2018 and 6.1 percent in 2019.

Excluding the pandemic-era collapse and rebound from 2020 to 2022, when growth averaged 1.3 percent annually, the economy slowed further, posting 5.5 percent in 2023, 5.7 percent in 2024, and 4.4 percent last year.

IBON noted that the temporary demand drivers that fueled growth since the mid-2000s had already weakened before the pandemic. The group said the nine-year slowdown stems largely from the neglect of agriculture and manufacturing, which have failed to drive sustained growth.

IBON noted that the most significant factor in the GDP slowdown is the softening of household consumption since 2017 after a peak growth of 7.1 percent in household final consumption expenditure (HFCE) in 2016, this fell to an average annual increase of 5.9 percent in 2017 to 2019, a pandemic shock of 1.5 percent in 2020-2022, and then back to the slowdown trajectory of just 5 percent in 2023-2025.

HFCE growth slowed because wage employment plateaued and remittance growth decelerated. The share of wage and salary employment in GDP grew rapidly during the high-growth years, from 50 percent in 2003 to 62 percent in 2016. 

But it stalled at around 63 percent during the slowdown period from 2017 to 2025. Meanwhile, the share of overseas remittances in GDP declined from 8.5 percent in 2017 to 7.5 percent as of 2024.

Manufacturing’s share of the economy has fallen to 17.3 percent, its smallest in 76 years, and agriculture to 7.9 percent, the least in the country’s history.

As a result, economic growth is trending back to its historical average of 5 percent or lower. This will persist unless genuinely transformative structural reforms, such as agrarian reform, massive public investments to improve rural productivity, and a determined, decades-long plan for Filipino industrialization, are undertaken.

Short-term reforms undertaken to make a six-year President look good are the usual remedy.