Growth slump may drag until 2027

The Philippines’ economic slowdown may extend through 2027, raising the odds of deeper monetary easing by the Bangko Sentral ng Pilipinas (BSP), according to Deutsche Bank Research.

In a report, it said the widening corruption scandal in the Department of Public Works and Highways — involving alleged fund diversion and irregularities in flood control projects — is likely to weigh on public and private investment for several years. It warned that the fallout could suppress growth and push the central bank to cut policy rates more aggressively.

“The public works corruption scandal is likely to be a drag on growth, as it reduces public and private capex (capital expenditure),” Deutsche Bank economists Vaninder Singh and Joey Chung said in the report released on Thursday. “BSP is likely to cut twice more, with risks of an even deeper easing cycle.”

The BSP has lowered borrowing rates by 175 basis points (bps) since August 2024, including a fourth straight 25-bp cut in October that brought the benchmark rate to a three-year low of 4.75%.

BSP Governor Eli M. Remolona, Jr. this week signaled that a fifth cut is possible at the Monetary Board’s December meeting, citing expectations that full-year growth will fall well below target. “Baby steps” of 25 bps remain the most likely pace, he added, ruling out larger cuts.

Mr. Remolona has said the economy might expand by only 4-5% this year, compared with the government’s 5.5-6.5% goal — a target he acknowledged is now out of reach.

The economy grew 4% in the third quarter as consumer and investor sentiment weakened amid the budget scandal, pulling the nine-month average to 5%.

Deutsche Bank expects growth to remain subdued next year, projecting a 5.1% expansion in 2026, well below the government’s 6-7% goal. It sees a modest improvement to 6% in 2027 as investment conditions stabilize.

Its baseline view is for 50 bps of additional easing, bringing the policy rate to a terminal 4.25% by mid-2026.

“DB Economics expects two further rate cuts in response to a deeper negative output gap that will last longer, likely well into 2027,” according to the report. “The risk is, if anything, for an even deeper easing cycle.”

Meanwhile, ING Think also sees room for more easing next year, anchored on its expectation that inflation across major Asian economies including the Philippines will stay within target in 2026.

“In 2026, inflation is unlikely to rise above the central bank targets in any of the Asian economies under our coverage, and we still expect rate cuts in… the Philippines,” it said in a separate report.

Philippine inflation averaged 1.7% in the first 10 months of the year, matching the BSP’s full-year forecast. The central bank expects inflation to settle at 3.1% in 2026 and 2.8% in 2027.

Deutsche Bank also flagged risks to the peso, warning that the currency could temporarily weaken past P60 a dollar next year if corporate sentiment deteriorates further.

It expects a recovery later in the year as import demand eases and the current account deficit narrows.

“Poor corporate sentiment is showing through not just in potential capex decisions but also in views on the currency,” it said, citing conversations with onshore clients.

“We suspect this will play out in phases over the course of 2026 — a possible peso weakness first, followed by some recovery as the current account deficit shrinks due to the infrastructure and capex factors,” it added.

It also noted that while stretched short-peso positions could push the currency beyond P60, the exchange rate should eventually return to P57-P58 or firmer if the dollar softens.

The peso fell to P59.17 a dollar on Nov. 12, its weakest on record.

Source: Business World

PH property sector’s 2026 outlook mixed

Expect a “mix of headwinds and tailwinds“ in the Philippine property sector in 2026, said Joey Roi Bondoc, director and head of research at real estate services and investment management firm Colliers Philippines.

On the upside, the Metro Manila office market is showing signs of recovery and will improve next year, Bondoc pointed out, noting the recovery will be driven by IT-BPM firms and traditional corporate occupiers.

Other forecasts, according to Bondoc:

From 2026 to 2028, about 350,000 sq m of new office space will be delivered — significantly lower than pre-pandemic levels, but ensuring manageable supply.

Prime central business districts (CBDs) such as Makati and Bonifacio Global City will lead rental recovery, while flexible workspaces will expand aggressively in Cebu, Pampanga, and Iloilo, supporting decentralization and business continuity strategies.

Unsold houses

On the downside, as of the third quarter, the Metro Manila residential sector had over 30,000 unsold, ready-for-occupancy units for which real estate developers offered promos such as extended payment terms and rent-to-own schemes to increase mid-income sales amid elevated mortgage rates.

However, the C5 Corridor and Katipunan areas continue to draw buyers, with take-up rates reaching up to 100 percent for select projects.

Industrial estate, hotel markets

Central Luzon is seen to dominate the industrial estate market. Colliers projects 870 hectares of industrial land to be delivered from 2026 to 2028, quadruple the pipeline of Southern Luzon.

Despite low foreign visitors, the country’s hotel market benefits from domestic tourism and various meetings, incentives, conferences, and exhibitions (MICE).

Over 3,000 new hotel rooms are to be completed in 2026 in Makati and the Manila Bay Area, Bondoc said.

The retail property trends remain strong, with Metro Manila vacancy to fall below 10 percent by end-2026. Foreign brands and aggressive mall refurbishments are driving demand, while developers expand outside Metro Manila into Cebu, Bacolod, and Davao.

To achieve growth, developers must embrace diversification, invest in emerging growth corridors, and leverage technology-driven solutions to stay competitive amid shifting demand patterns, Bondoc advised.

“To thrive in this cyclical market, developers must future-proof strategies — diversify portfolios, invest in suburban growth corridors, leverage industrial expansion, and embrace flexible workspace solutions. Capitalizing on retail refurbishments and innovative residential promos will be key to staying competitive in the evolving Philippine real estate market,“ Bondoc said.

Source: Manila Times

PH incomes can match Europe level – in 2050

The catch is that it won’t be happening anytime soon.

England-based research and advisory company Oxford Economics said in a report released on Wednesday night that it expects Manila residents’ incomes to approach the European level by 2050, as it highlighted the rapid ascent of Asian cities within global value chains and the “closing” gaps in living standards between emerging and developed economies.

Oxford Economics associate director Liam Sides and senior economist Christopher Reynolds said Manila is projected to add more than a million jobs in business services from 2025 to 2050.

In cities like the Philippine capital, they said such roles have expanded far beyond call-center work to include higher-skilled positions in IT, software development, data analytics, and other technical fields, offering both better pay and career growth.

High-value services

Sides and Reynolds said three other Asian cities — Delhi and Mumbai in India and Shenzhen, China — are expected to see similar gains, reflecting a broader shift in the region toward high-value service employment.

While job growth in business services has also been strong across the Middle East, the two analysts said it was Asian markets “that have dominated growth in business services since 2010 — and they will continue to do so.”

“Indeed, cities across Asia are becoming both significantly more populous and wealthier. In terms of the overall increase in high-income households between 2025 and 2050, Asian cities take eight of the top 10 spots globally,” they added.

Wide gap

Latest figures from the Philippine Statistics Authority show that the average annual income of families in Manila reached P482,490 in 2023, well above the national average of P353,230.

The income increase in Manila marked a 16.7-percent rise from 2021, the last year the triennial household survey was conducted. That slightly outpaced the 15-percent growth recorded nationwide.

Meanwhile, families in the wider National Capital Region earned an average of P513,520 in 2023, nearly 23-percent higher than in 2021.

The European Commission’s Eurostat policy department puts the average income of its residents at €37,860 a year (equivalent to P2.6 million at the current exchange rate).

Laggard

Among the nine major Asian cities analyzed in the report, Manila will be the slowest to catch up.

Estimates from Oxford Economics showed that Manila’s projected income growth would make it “increasingly comparable,” but not fully on par with European averages, over the next 25 years.

On the other hand, Shanghai, Beijing, Bengaluru, Hyderabad, Shenzhen, Jakarta and Mumbai are all expected to surpass average European city living standards, while Ho Chi Minh City could reach parity.

In India, Hyderabad and Bengaluru are expected to surpass the European average for personal incomes before the end of the next decade, with Mumbai following before the end of 2050. 

Jakarta is projected to follow a similar trajectory, supported by Indonesia’s abundant natural resources and its relatively young, highly skilled workforce.

“Overall, these shifts represent a dramatic reversal, with people in China, India, and Indonesia returning to more similar levels of income relative to Europe, as they had before the Industrial Revolution,” Sides and Reynolds said.

“Convergence in global living standards is not inevitable,” they added.

Source: Business World