Investments recovery key to growth rebound

A rebound in public and private investments could lead to gradual economic gains for the Philippines and a return to 6.0-percent growth, a senior Asian Development Bank (ADB) official said.

“I guess the main variable for 2026 is how fast does the public investment recover,” ADB Country Director Andrew Jeffries told reporters on the sidelines of the Bangko Sentral ng Pilipinas’ (BSP) Annual Reception for the Banking Community last Friday.

“[W]e were thinking maybe two quarters,” he added, with the last six months of this year setting the stage for a stronger expansion in 2027.

For 2026, he said: “Imagine a slower quarter one and maybe a little better quarter two and then maybe a little better quarter three and a good quarter four.”

A return to 6.0-percent growth is possible, but Jeffries stressed that “high investment, public and private... would be, to me, the key driver... the other things seem to be going pretty well.”

He also said that exports would have to improve for long-term economic growth and economic resiliency, which will require sustained reforms, stronger investment promotion, and improvements in the business environment.

“It’s not something that happens overnight,” he said. “But, you know, neighbors have done it, and the Philippines can do that.”

Citing “reduced public infrastructure spending,” the Manila-based lender last month lowered its 2025 and 2026 growth forecasts for the Philippines to 5.0 percent and 5.3 percent, respectively, from 5.6 percent and 5.7 percent.

The country enjoyed a run of above 6.0-percent growth before the Covid-19 pandemic hit, leading to a 9.5-percent plunge in 2020. It saw a recovery in the following two years, recording a spike of 7.6 percent in 2022, but then posted below-target results of 5.5 percent and 5.7 percent in 2023 and 2024.

A 5.5- to 6.5-percent expansion was targeted for 2025, and despite a middling start to the year, officials expressed hope of a return to target. A massive flood control project scandal, however, led to a marked third-quarter slowdown that likely extended to the rest of the year.

A third straight growth miss and a marked full-year slowdown to below 5.0 percent are expected to be announced this Thursday.

BSP Governor Eli Remolona Jr. has said that 2025 growth could have slowed to 4.6 percent, while Socioeconomic Planning Secretary Arsenio Balisacan has predicted a 4.8- to 5.0-percent outcome.

Earlier this month, Remolona said the corruption scandal would have “a long impact” on economic growth, with the loss of confidence among investors and households possibly extending up to the first half of 2026.

Still, he expects a recovery to 5.4 percent this year and a further improvement to 6.0–6.2 percent in 2027, within the downwardly-revised targets of 5.0–6.0 percent and 5.5–6.5 percent.

Source: Manila Times

ADB expects PHL household spending to improve in 2026

The Asian Development Bank (ADB) said household consumption in the Philippines is likely to rebound in 2026 on the back of easing inflation and interest rates, after a corruption scandal and adverse weather dampened spending in recent months.

However, analysts warned that depending on tax relief to spur consumption could undermine fiscal consolidation efforts.

ADB Country Director for the Philippines Andrew Jeffries said household final consumption expenditure, which accounts for over 70% of the economy, is expected to “strengthen in 2026 amid low inflation and accommodative monetary policy.”

“More broadly, policies need to focus on raising incomes and reducing vulnerability,” he said.

Mr. Jeffries said these measures should include expanding higher‑quality employment, boosting productivity through skills upgrading, and targeted social protection for vulnerable households.

This comes as private consumption growth moderated in the third quarter of 2025, particularly discretionary spending on recreation, hotels and restaurants, partly due to weather‑related disruptions, he said.

Data from the Philippine Statistics Authority (PSA) showed household final consumption expenditure slowed to 4.1% in the third quarter from 5.2% a year ago.

This was the slowest since the 4.8% contraction in the first quarter of 2021. Excluding pandemic years, it was the slowest growth in private spending since the 2.6% increase in the third quarter of 2010.

The PSA will release the fourth-quarter and annual 2025 preliminary gross domestic product (GDP) data, including household consumption, on Jan. 29.

Despite the slower growth in the third quarter, the ADB said spending on essentials, particularly food, remained resilient, supported by low inflation.

Inflation picked up to 1.8% in December from 1.5% in November. This brought the average to 1.7% in 2025.

For 2026, the central bank sees inflation accelerating to 3.2%, but still within the 2-4% target band.

The Bangko Sentral ng Pilipinas (BSP) has so far delivered a total of 200 bps in cuts since August 2024, after it lowered its policy rate by 25 bps to an over three-year low of 4.5% at its Dec. 11 meeting, amid subdued inflation and sluggish growth.

The Monetary Board is scheduled to hold six regular policy meetings in 2026, with the first one set on Feb. 19.

TAX RELIEF?

To spur household demand and ease public concerns over flood control issues, a lawmaker had proposed giving tax relief to Filipinos, but analysts were divided, saying the measure could lift spending but risk undermining fiscal consolidation.

Senator Erwin T. Tulfo filed a bill in the Senate in October to provide a one-time, one-month income tax holiday for individual taxpayers receiving compensation income, effective on the first payroll month immediately following the bill’s approval.

Senate Bill No. 1446, or the One-Month Tax Holiday bill, remains pending at the committee level.

“A tax relief will only delay fiscal consolidation,” Foundation for Economic Freedom President Calixto V. Chikiamco said.

The Marcos administration aims to bring the deficit down to P1.56 trillion, or 5.5% of GDP, in 2025, and eventually to P1.55 trillion, or 4.3% of GDP, in 2028.

Mr. Chikiamco noted that many factors influence consumer spending, such as unemployment, inflation, and wage growth.

“Depreciation of the peso will increase OFW (overseas Filipino worker) incomes and spur consumer spending without decreasing government revenues,” he added.

The peso has breached the P59-a-dollar mark several times since November and sank to a record low of P59.22 on Dec. 9.

Meanwhile, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., argued that tax relief can boost private consumption, but the program has to be “smart and targeted.”

“Tax relief can help revive spending, especially after a year of high prices and tight budgets,” he said.

“Focus on essentials like VAT (value-added tax) breaks on food and utilities, and give relief to lower- and middle-income families who are more likely to spend,” Mr. Ravelas added.

However, he said tax relief must be “time-bound,” and paired with job creation and price stability, so people feel confident to open their wallets.

“The problem on spending is due to the uncertain environment due to ‘floodgate,’ the government should fix its trust issues so confidence will come back,” Mr. Ravelas said, referring to the flood control mess.

Meanwhile, the ADB’s Mr. Jeffries said improving VAT efficiency and sustaining gains in tax administration through digitalization are key to raising government revenue.

“The proposed tax on single-use plastic bags is a notable measure, serving both revenue and environmental objectives by helping address plastic and solid-waste challenges,” he said.

BIR Commissioner Charlito Martin R. Mendoza earlier said the proposed tax measure is projected to generate between P6 billion and P10 billion annually, “depending on the rate and coverage.”

“Beyond taxation, sustained improvements in expenditure efficiency and public financial management are crucial, particularly to strengthen investment planning, project execution, and governance,” Mr. Jeffries said.

Source: Business World

Uncertainties seen tempering PH growth

Philippine economic growth will likely slow this year due to external headwinds, the Asian Development Bank (ADB) reiterated on Tuesday as it kept its forecast for 2025 and lowered that for next year.

In the September edition of its Asian Development Outlook (ADO), the Manila-based lender maintained the 2025 gross domestic product (GDP) growth projection announced in a July supplement. It was a higher 6.0 percent in the April ADO.

If realized, GDP growth will have slowed from last year’s 5.7 percent but hit the government’s downwardly revised 5.5- to 6.5-percent target. The 2024 result, which fell below the 6.0- to 6.5-percent goal for that year, was attributed in part to a series of typhoons.

Unilateral tariff increases initiated by US President Donald Trump and heightened geopolitical tensions, meanwhile, prompted the government to lower its 2025 and 2026-2028 targets in June.

While the ADB forecast for this year falls within the updated range, that for 2026 — a reduced 5.7 percent compared to the 5.8 percent in June and 6.1 percent in April — is lower than the new 6.0- to 7.0-percent target.

“External headwinds and heightened uncertainty over global economic policies have weighed down trade and investment prospects,” ADB Country Director Andrew Jeffries told a briefing.

A 19-percent tariff rate levied by the US on Philippine exports, which took effect in August, is expected to have an impact on outbound shipments. However, solid domestic demand — seen remaining the main engine of growth — should provide an offsetting effect.

The rate — down from the 20 percent threatened in July but higher than the 17 percent announced in April — is seen as offering little in terms of a strategic trade advantage over neighboring Southeast Asian economies.

Still, the ADB said that Philippine growth would remain strong and Jeffries said “sustained government investments, including for social services, is seen boosting domestic demand.”

“The Philippines’ growth outlook remains resilient amid a global environment of shifting trade and investment policies and heightened geopolitical uncertainties,” he added.

“Though these uncertainties pose increased risk, we see strong domestic demand anchoring growth, with sustained investments and an accommodative monetary policy supporting the economy’s expansion.”

Asked whether an ongoing corruption scandal would have an impact, Jeffries said: “We didn’t see a reason at this point in time to reduce those GDP projections due to that issue.”

“But it’s certainly a heightened risk,” he added.

“Between now and our December update, there may be more quantifiable data available that may alter our projections.”

Jeffries said that while the ADB takes “corruption and public financial management very seriously,” it is also mandated to “support our developing member country governments and to help solve complicated projects, not to shy away from helping solve such projects.”

“We have very strong due diligence on the financial management capabilities of our borrowers and any gaps found are built into the project to mitigate financial management risks.”

He added that the ADB requires audited, project-level financial statements from approved auditors for ongoing expenses. Loan disbursements are also strictly monitored to ensure that funds are released only when contracted construction milestones are met.

“So we take this very seriously and... we actually see potentially more support being asked of us to help address this problem going forward,” Jeffries said.

Source: Manila Times