Growth rebound seen; structural changes urged

Philippine economic growth will likely rebound this year after a marked slowdown in 2025, a brokerage firm said, lifted by a recovery in public infrastructure spending and the impact of interest rate cuts.

Philstocks Financial Inc. said 2026 growth could hit 5.0 percent — at the bottom end of the government’s 5.0- to 6.0-percent goal for the year — but also warned of risks from an inflation uptick and weaker exports.

State spending, which slowed last year as a flood control project scandal unfolded, was forecast to recover as a result of governance reforms while consumption — also affected by the corruption mess — is expected to strengthen as policy rate cuts work their way through the economy.

Remittances from Filipinos working abroad will also provide support to consumer spending and residential investments, Philistocks said.

This will likely be supported by a weaker peso, which is expected to average at P59.5 to the dollar — a new record low — amid a continued balance of payments deficit and lingering investor concerns.

Inflation, which averaged 1.7 percent last year, is projected to accelerate to 3.2 percent in 2026 — within the 2.0- to 4.0-percent target — due to stronger demand, higher food prices and the weaker peso.

The Bangko Sentral ng Pilipinas, which has lowered key interest rates by 200 basis points beginning August 2024 as inflation returned to target, is expected to order another cut this year to boost economic growth.

Philstocks said the economic rebound will also be seen in the stock market, with the benchmark Philippine Stock Exchange index (PSEi) expected to hit the 7,100 level after languishing in the low 6,000s last year.

The 2026 recovery will be supported by robust corporate fundamentals and an estimated 15-percent earnings growth among index members, the brokerage said.

It noted that as of January 30, 2026, the PSEi was trading at a price-to-earnings ratio of 10.5 times, well below its five-year average of 14.4x and the regional average of 19.0x, indicating that local stocks remained at attractive levels.

Sector-wise, Philstocks expects residential property developers, banks, consumer companies and nickel miners to benefit from low interest rates, improving labor market conditions and potential gains in global nickel prices.

As this developed, an economist said that boosting the economy was not just about increased consumption and spending but expanding the sources of growth.

“There should be a wider discussion on the structure of the economy,” Bank of the Philippine Islands lead economist Emilio Neri said in a commentary.

“The country cannot remain overly reliant on a narrow set of growth drivers such as consumption and government spending.”

The limited set of growth sources was highlighted last year by the corruption scandal and the vulnerability was also evident during the Covid-19 pandemic, he said.

“For many years, the Philippine economy has been heavily reliant on consumer spending, supported by remittances and the BPO (business process outsourcing) sector,” Neri said.

“When the pandemic hit, the economy contracted sharply as lockdowns severely disrupted consumption,” he added, noting that countries like Vietnam, with more diverse growth drivers, were better able to withstand the shock.

The same pattern was said to be showing now with growth largely due to household spending.

“[T]he slowdown would likely not have been as severe if the economy had other strong engines of expansion beyond consumption,” Neri said.

“Even with the sharp decline in government construction spending, growth might have been more acceptable if the production sectors had been in a stronger position to offset the drag, specifically agriculture and manufacturing,” he added.

“Greater emphasis must therefore be placed on strengthening production sectors such as agriculture, manufacturing, and construction, supported by high-quality infrastructure that enhances the economy’s ability to produce.”

“The economy remains strong on the demand side, but it is still unable to produce a significant portion of what it consumes,” he noted.

Quality of spending will also be critical for a recovery this year.

Neri said growth could stay weak in the first half of 2026 but rebound in the second half, with full-year growth likely to hit 5.1 percent.

He added that the weak growth reading has also raised the chances of more Bangko Sentral rate cuts.

“With growth likely to remain weak in the first half of 2026, another cut could follow after a potential move in February, especially as inflation is expected to remain within target,” Neri said.

Source: Manila Times

Infrastructure spending declines for fifth straight month in Nov.

Government infrastructure spending fell further in November as the flood control project scandal continued to unfold, the Department of Budget and Management (DBM) said.

Infrastructure and capital outlays plunged by 45.2 percent in November to P48.0 billion from P87.6 billion a year earlier, and the DBM said “the spending performance of the DPWH (Department of Public Works and Highways) continued to post negative growth amid the ongoing probe and crackdown on corruption issues.”

“This consequently slowed down the implementation of its various infrastructure projects nationwide and affected the prompt submission of progress billings by contractors and processing of payment claims,” it added.

The scandal broke after President Ferdinand Marcos Jr. said in July that substandard projects had led to massive flooding in Metro Manila and other parts of the country.

It has led to a shake-up at the DPWH, leadership changes in Congress and a Cabinet revamp that cost Amenah Pangandaman her post as Budget secretary.

Those directly involved in the scandal, however, have yet to be jailed and the impact on spending and sentiment has yet to dissipate despite government promises of reforms.

Infrastructure and capital outlays were also lower year to date, falling by 16 percent to P991.1 billion from P1.18 trillion in January-November 2024.

“Infrastructure spending was weighed down significantly by the contraction of DPWH’s disbursements during the period in the wake of flood control corruption issues,” the DBM said.

“On the other hand, subsidies were lower year on year owing to minimal requests for subsidy releases by the National Irrigation Administration given their available cash holdings,” it added.

The department also said that funding for the National Health Insurance Program was charged against Philippine Health Insurance Corp.’s operating budget, which contributed to the spending drop.

About P140.4 billion remained available for release from the regular budgets of departments (P97.7 billion), special purpose funds (P42.6 billion) and automatic appropriations as of Nov. 30, 2025.

This was despite the 2025 obligation program of P6.33 trillion already having been exceeded following additional releases from continuing, automatic and unprogrammed appropriations.

The release of the remaining funds depends on the agencies concerned submitting special budget requests and required documents, which will be reviewed by the DBM

Based on preliminary data, around P74.3 billion in allotments was released in December, which could have supported government spending toward the end of 2025.

Source: Manila Times

Gradual recovery seen following growth miss

Economic growth is expected to gradually recover this year on the back of increased government spending and exports, a Cabinet official said, following a marked slowdown in 2025.

“[T]he whole year [has] four quarters right?,” Finance Secretary Frederick Go told reporters on Friday.

“We’re not going to get there in the first quarter ... I guess, if we do everything right, it’s progressive. It’s [going] to happen progressively.”

Gross domestic product growth slumped to 4.4 percent in 2025, from 5.7 percent a year earlier, as a massive corruption scandal weighed on spending and sentiment.

The result marked the third year that the government missed its growth targets, although officials have expressed optimism of a rebound beginning 2026.

The target for this year has been lowered to 5.0-6.0 percent from 6.0-7.0 percent to take into account the continued impact of the corruption issue and external uncertainties. That for 2027 was also cut to 5.5-6.5 percent from 6.0-7.0 percent.

Go claimed that foreign investors remained interested in the country and added that exports would play a significant role in boosting economic growth.

“Export actually is the bright spot in all of that, when you look at [gross domestic product] growth,” he said.

Government spending, which slumped in the third and fourth quarters, is expected to improve, and Go said that the Finance and Budget department met earlier this week to clear the amount to be spent for January-March.

“Actually I can give you the number — it’s P1.4 billion for primary spending for the first quarter,” he said.

The “top spenders,” which include the Department of Public Works and Highways, the Department of Education, the Department of Health, the Department of Agriculture and the Department of Transportation, were also present during the meeting.

“We agreed with them what their spending will be, how much money will be released,” Go said.

As for the revenue agencies, he said “The BIR (Bureau of Internal Revenue) has their targets, the BOC (Bureau of Customs) has their targets.”

“I think their targets are achievable — I’m hopeful we will achieve those targets.”

Revenue goals have been lowered given downwardly revised economic growth targets, with the government now aiming to collect P4.824 trillion this year instead of P4.983 trillion.

The target for next year was likewise reduced to P5.122 trillion from P5.366 trillion while in 2028, collections were now projected to reach P5.568 trillion instead of P5.914 trillion.

Based on earlier data, the BIR has been tasked to collect P3.431 trillion, lower than the P3.579 trillion under the 2026 Budget of Expenditures and Sources of Financing.

The BOC goal was likewise reduced to P1.003 trillion from P1.013 trillion. Nontax revenues, on the other hand, were set at a higher P349.9 billion from P249.1 billion.

Both agencies missed their targets last year. The BIR collected P3.105 trillion, short of its P3.232-trillion goal, but this was still above the P2.83 trillion recorded in 2024.

The BOC, meanwhile, generated P934.4 billion, below the P958.7-billion target, although this was again higher than the P916.674 billion collected in 2024. 

Source: Business World