Undated photo shows workers in an apparel manufacturing plant located at the Mactan Export Processing Zone in Cebu province. (Photo courtesy of MEPZ Workers Alliance)
MANILA — The Philippine economy slowed sharply at the end of 2025, prompting renewed concern that growth driven largely by services is no longer sufficient to sustain long-term development. Business groups say the latest figures highlight a deeper structural issue: the continued weakness of manufacturing and industrial production.
Data from the Philippine Statistics Authority show gross domestic product expanded 3.0 percent in the fourth quarter of 2025, the weakest quarterly growth in several years outside the pandemic period. For the full year, economic growth reached 4.4 percent, missing the government’s target for the third consecutive year.
Economists attributed the slowdown to softer household spending, reduced government expenditure, and weaker investment activity. Industry leaders, however, say the data also reflect long-standing imbalances in the economy, with services continuing to dominate while productive sectors lag.
Services such as retail, tourism, real estate, and business process outsourcing remain the largest contributors to economic output. While these sectors provide employment and relatively stable income growth, economists note that they generate limited productivity gains and do little to expand export capacity.
Manufacturing and other industrial activities have struggled to gain traction. Government figures show industry growth trailing services, limiting higher-value job creation and increasing reliance on imported goods. Business groups warn that as neighboring Southeast Asian economies expand industrial capacity, the Philippines risks losing competitiveness in attracting investment and integrating into global supply chains.
The Federation of Philippine Industries has urged policymakers to place industrial development back at the center of economic strategy. The group has said services alone cannot support sustained growth and that manufacturing is essential for job creation, exports, and economic resilience.
While the government has enacted policies such as the Tatak Pinoy Act to support local industries, business groups say implementation has been uneven. Multilateral lenders, including the Asian Development Bank, project moderate growth in 2026 but warn that long-term performance will depend on structural reforms rather than short-term stimulus.
