Targeted tax incentives and less borrowings may help Philippines avert 'growth recession' — CPBRD

THE PHILIPPINE government should boost industrial output through targeted tax incentives while cutting reliance on borrowing, allowing the private sector to drive economic activity and support a slowing economy that showed signs of a “growth recession” last year, a congressional think tank said.

- By Kenneth Christiane L. Basilio Reporter

The Congressional Policy and Budget Research Department (CPBRD) said Philippine job data point to a recession based on an economic indicator that flags a looming slowdown when the three-month average unemployment rate climbs half-a-percentage point above its past-year low.

“The burgeoning unemployment problem is likely related to the demonstrably hamstrung industrial sector,” the 24-page report, authored by David Joseph Emmanuel Barua Yap, Jr., Ma. Kristina P. Ortiz and Krishna Margaret U. Mirida, said.

The think tank said employment data breached the Sahm rule for five months from July to November 2025, while seasonally adjusted job figures from 2023 to 2025 showed the threshold was crossed for nine months from February to October 2025.

Seasonally adjusted job data from 2021 to 2025 showed that the Sahm rule was breached only in November 2025, it added.

“All outcomes indicate substantial labor market stress, with employment contracting by 1.76 million workers on average during Sahm — signal months in which the labor force declined or stagnated, and youth unemployment peaking at 3.2 percentage points year on year,” the CPBRD said.

“Viewed in conjunction with the appreciable slowdown of the Philippine economy in the third quarter, evidence suggests that the Philippines entered a ‘growth recession’ in the latter half of 2025,” it added, referring to the revised 3.9% gross domestic product (GDP) growth in the third quarter.

While a formal recession is defined as two consecutive quarters of contraction, recent economic data have raised concerns over a “growth recession,” where GDP growth remains positive amid rising unemployment and underemployment.

Philippine GDP grew by 4.4% in 2025, slowing from 5.7% in 2024, and below the Development Budget Coordination Committee's 5.5%-6.5% goal. In the fourth quarter, GDP expanded by a weaker-than-expected 3% in a period usually buoyed by holiday spending.