Philippines steps up spending as scandal, war-hit remittances weigh on growth

One of ASEAN’s most resilient economies in 2025 continues to slow. Amid the overhang of a corruption scandal and war in the Persian Gulf, the Philippines’ government is stepping up spending to support growth.

The scandal, which involved funds earmarked for large construction projects, prompted the government and foreign lenders to hit the brakes on substantial investment plans. The energy shock followed; inflation peaked at a three-year high of 7.2% in April, and had only eased slightly by July.

A secondary effect of the US-Iran war particularly germane to the Philippines has been the hit to money sent home by expatriates working in shipping and the UAE’s services sector. Overseas remittances are a lifeblood of the economy; it’s estimated that more than 2 million Filipinos worked in the GCC nations before hostilities began.

Household consumption grew just 2.8% in the second quarter, its weakest non-pandemic pace since 2010; meanwhile, residential construction has stalled.