Philippines may grow below 4% in near term

Philippine economic growth may fall below 4% in the near term as the billion‑peso flood control scandal drags on, affecting government spending and dampening consumption and sentiment, Nomura Global Markets Research said.

“I think going forward, these spillover effects (from the graft scandal) will also expand,” Nomura Chief Association of Southeast Asian Nations (ASEAN) Economist Euben Paracuelles said.

The scandal, which curbed state spending last year, is expected to dampen household consumption and business investment amid weaker sentiment, he added.

“If the drag is now sort of becoming more broad-based, not just the drop in government spending, you’ll see growth coming potentially below 4%, at least in the near term,” he said.

Nomura now expects the gross domestic product (GDP) to expand by 5.3% in 2026 from 5.6% previously.

This is still within the government’s recently revised 5-6% target this year.

Economy Secretary Arsenio M. Balisacan earlier said growth targets were lowered through 2027, after GDP growth likely slowed to 4.8-5% in 2025 amid the flood control controversy.

The government cut its 2026 projection to 5-6% and to 5.5-6.5% for 2027 from the earlier 6-7% range. The 2028 target was retained at 6-7%.

Mr. Paracuelles anticipates that the government will roll out catch-up spending plans, possibly in the second half of the year.

Meanwhile, the Philippines may earn a credit rating upgrade if the government manages to resolve the flood control corruption issue within a year, Mr. Paracuelles said.

“The key for me is 12 months from here, when they need to decide on whether they need to upgrade the Philippines, I think it’s still quite uncertain,” he said.

“If, at that point there will be some resolution to the corruption scandal, they could potentially upgrade the Philippines to ‘A-,’ right? But on the other hand, if there’s still no clarity, they could potentially — the risk I see is from ‘positive,’ we go back to ‘stable,’” he added.

Last year, former Finance Secretary Ralph G. Recto said the multibillion-peso flood control corruption mess may have derailed the country’s chances of earning a credit rating upgrade from S&P Global Ratings.

S&P said it kept its long-term “BBB+” and short-term “A-2” credit ratings on the Philippines, as well as its “positive” outlook.

A positive outlook means the Philippines’ credit rating could be raised over the next two years if improvements are sustained.

At the same time, Economy Undersecretary Rosemarie G. Edillion said the government expects the peso to move “sideways” after hitting a fresh low on Jan. 7.

“It really depends on what’s happening in the US as well versus what’s happening with our country. I think right now with the recent move of the US, everybody’s still weighing in. Is this a good or a bad thing?” she said in the same program on Thursday.

“Others will still adopt a wait-and-see attitude over the next few days,” she added.

The peso hit a record low on Jan. 7, closing at P59.355.

Source: Business World

Unemployment rate drops to 4.4% in Nov

The number of jobless Filipinos dropped in November, the Philippine Statistics Authority (PSA) reported on Wednesday, as the labor market improved.

The country’s unemployment rate was recorded at 4.4 percent, from October’s three-month high of 5.5 percent but higher than November last year’s 3.2 percent.

This translates to 2.25 million unemployed Filipinos, lower than the 2.54 million recorded in October 2025 but higher than 1.66 million in the same month last year.

Meanwhile, underemployment — which counts as those looking for more work or an extra job — declined to 10.4 percent, down from 12.0 percent and 10.8 percent a month and year earlier, respectively.

The number of underemployed individuals stood at 5.11 million. These are workers who express a desire for additional hours in their current job, an additional job, or a new job with longer hours.

Employment rate, meanwhile, recorded an uptick of 95.6 percent, up from 95.0 percent recorded a month earlier but lower than the 96.8 percent last year. The number of individuals with jobs reached 49.26 million.

The country’s Labor Force Participation Rate (LFPR) in November was registered at 64.0, higher than the 63.6 percent a month earlier but lower than the 64.6 percent recorded a year earlier.

Source: Manila Times

Philippine 2025 inflation slows to 1.7%, a 9-yr low

Inflation in the Philippines climbed at the end of 2025 as late-season storms and holiday demand pushed food prices upward, the Philippine Statistics Authority (PSA) reported.

The December reading came in at 1.8 percent, up from 1.5 percent in November. Even so, inflation remained subdued, staying within the Bangko Sentral ng Pilipinas’ (BSP) 1.2- to 2-percent forecast range for the month.

It was also above the 1.5-percent median estimate of 11 economists polled by the Inquirer.

The result capped 2025 with a full-year average inflation rate of 1.7 percent, the slowest since 2016, when it stood at 1.3 percent. This marks the 10th consecutive month that inflation undershot the central bank’s 2- to 4-percent target.

Higher food costs

Reversing the previous month’s decline in food costs, higher prices in December were driven by late-season typhoons and holiday demand, PSA Undersecretary and National Statistician Dennis Mapa said.

Food and nonalcoholic beverages, which make up nearly a third of the consumer basket, rose 1.4 percent in December. This accounted for 97.5 percent of the overall inflationary pressure for the month.

According to Mapa, while rice prices continued to decline, higher vegetable costs—driven by Typhoon “Uwan’s” impact on farms—surged to 11.6 percent in December, up from 4 percent, offsetting the rice price drop.

Holiday demand also contributed to the pressure, with price increases seen in meat, flour, bread and bakery products.

Economists at Chinabank Research, who expect inflation to inch up in 2026, said inflation remains under control despite the December uptick.

“Still, barring new shocks, price pressures are projected to remain manageable moving forward,” they said. “This outlook for benign inflation would likely allow the BSP to offer more support to the economy through additional policy rate cuts.”

On Dec. 11, the BSP had already slashed the policy rate by a quarter point to 4.5 percent to cushion the economy from the third-quarter slowdown, partly due to the widening fallout from the flood control scandal.

Purchasing power

John Paolo Rivera, a senior research fellow at the Philippine Institute for Development Studies, said price pressures were broadly contained for the year, but typhoon-related spikes could temper fourth-quarter growth.

“This low inflation (full-year average) supports household purchasing power, but the disaster-related price increases likely coincided with lost incomes and disrupted activity, which could temper consumption and shave some momentum off Q4 growth,” he said.

“Overall, inflation is not the constraint, as the bigger issue for Q4 is weather shocks and execution, not just prices,” Rivera added.

Reflecting cautious optimism, Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said the full-year average gives consumers more spending power, but the December spike shows that short-term risks remain.

“The impact is mixed: higher food prices may pinch wallets in the short term, but overall low inflation supports consumption and keeps the economy resilient. Still, upside risks to inflation remain,” he said.

For its part, the Department of Economy, Planning and Development (DepDev) said the Philippine economy was on track to remain resilient against price pressures despite ongoing headwinds.

Momentum

“Building on this momentum, the government will continue to pursue prudent fiscal and monetary coordination and advance structural reforms to sustain the downward inflation trend,” DepDev Secretary Arsenio Balisacan said.

Meanwhile, the Department of Finance (DOF) said the record-low full-year average inflation reflected the government’s “strong, coordinated approach,” noting that it came in below the 4.2 percent global inflation rate projected by the International Monetary Fund for 2025.

“The DOF is committed to implement necessary measures to keep inflation manageable and ensure that Filipino families are protected from price shocks,” Finance Secretary Frederick Go said.

Source: Inquirer