Economy may see faster growth in 2026, 2027

The Philippine economy may expand at a faster pace this year and in 2027, supported by household consumption and softer inflation, the United Nations (UN) said, as the country rebounds from a corruption scandal.

In its latest World Economic Situation and Prospects report, the UN projected the Philippine gross domestic product (GDP) to grow by 5.7% this year and 6.1% in 2027.

“In the Philippines, low inflation, robust labor market conditions, and steady remittance inflows have buoyed consumer spending, while government spending and investment have further supported growth,” the UN said.

The UN’s forecasts are both within the revised government’s 5-6% growth target for this year and within the 5.5-6.5% target for 2027.

It also noted that GDP growth likely averaged 5% in 2025, below the government’s 5.5-6.5% target and the actual 5.7% growth in 2024.

Economy Secretary Arsenio M. Balisacan earlier said the Philippines’ economic growth may have slowed to 4.8% to 5% in 2025, due to the controversy on anomalous flood control projects that affected government spending and hurt business and consumer confidence.

The Philippine Statistics Authority will release official fourth-quarter and full-year 2025 GDP data on Jan. 29.

Despite this, the Philippines is projected to be the second-fastest-growing economy in Southeast Asia this year and in 2027.

Vietnam is projected to grow by 6% this year, followed by the Philippines (5.7%), Cambodia (5.1%), Indonesia (5%), Malaysia (4.0%), Laos (3.8%), Timor-Leste (3.3%), Myanmar (3%), Thailand (2%), Singapore (1.8%), and Brunei (1.5%).

For 2027, Vietnam is still likely to post the fastest growth at 6.2%, followed by the Philippines (6.1%), Cambodia (5.5%), Indonesia (5.2%), Malaysia (4.5%), Laos (4%), Timor-Leste (3.2%), Myanmar (3%), Thailand (2.6%), Singapore (2%), and Brunei (2.1%).

The Philippines’ forecast is above than the UN’s projected average growth of 4.4% for East Asia this year and in 2027.

At the same time, the UN also anticipates inflation settling at 2.3% in 2026 and 2.8% in 2027, slower than the BSP’s 3.2% forecast for 2026, and 3% in 2027.

Headline inflation picked up to 1.8% in December, which brought the full-year average to 1.7% in 2025.

Source: Business World

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

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