World Bank sees PH growth slump to 3.7% in 2026

The World Bank has slashed its 2026 growth forecast for the Philippines to a sluggish 3.7%, down from earlier projections of over 5%. Released in the latest East Asia and Pacific Economic Update on April 8, 2026, this downgrade signals headwinds from global trade tensions, persistent inflation, and domestic fiscal strains.

For a nation long riding high on post-pandemic recovery, this slump raises tough questions—especially for real estate investors watching condo towers rise amid cooling demand.

Why the Downgrade? Key Headwinds Exposed

Several factors are dragging down the outlook:

• Global Trade Slowdown: Escalating U.S.-China tariffs and weaker demand from major partners like the U.S. and EU are hitting Philippine exports hard. Electronics and semiconductors, which make up 60% of exports, face a projected 2-3% contraction.

• Inflation and High Interest Rates: Headline inflation lingers at 4.2%, above the Bangko Sentral ng Pilipinas (BSP) target. The BSP held rates at 5.75% in Q1 2026, squeezing borrowing costs for businesses and households.

• Fiscal Pressures: Government spending growth slowed to 4.1% amid rising debt servicing (now 6.5% of GDP), limiting infrastructure push despite the Build Better More program.

• Weather Risks: Back-to-back typhoons in late 2025 disrupted agriculture and construction, shaving 0.5% off GDP estimates.

The World Bank now sees 2026 GDP at 3.7%, rebounding modestly to 4.6% in 2027—still below the government's optimistic 6-7% target.

Real Estate Ripples: A Cooling Market Ahead

For property watchers like us, this forecast spells caution. Residential demand, fueled by OFW remittances and urban migration, faces headwinds:

Segment	2025 Growth	2026 Projection	Key Driver
Condos (Metro Manila)	+8%	+3-4%	Higher mortgage rates curb BPO-driven buys
Houses (Suburban)	+6%	+2%	Slowing job growth hits middle-class demand
Office (Tier 2 Cities)	+5%	Flat	BPO expansion stalls amid global IT cuts
Industrial (Clark, Batangas)	+10%	+5%	Export slump delays warehouse builds

Pre-selling condo prices in Quezon City and Makati have softened 5-7% year-on-year, per Colliers Philippines data. Developers like Ayala Land and SM Prime report unsold inventory piling up, prompting discounts. Commercial rents in BGC could dip 3% if vacancy rates climb past 15%.

Yet, pockets of resilience persist: Government infra like the NLEX-SLEX Connector and airport expansions will buoy logistics properties. Affordable housing under P1M remains hot in Central Visayas and CALABARZON, supported by 4Ps subsidies.

Investor Playbook: Navigate the Slump Smartly

Don't panic-sell—position for the rebound:

1. Hunt Value: Target undervalued suburban lots near infra projects. Yields could hit 7-8% post-2027.

2. Diversify: Mix residential with industrial REITs (AREIT up 12% YTD despite the gloom).

3. Lock Rates: Refinance now before BSP cuts (expected Q4 2026).

4. Watch Policy: A midterm election pivot toward stimulus could spark a Q3 rally.

The Philippines' fundamentals—young workforce, digital boom—remain solid. This 3.7% dip is a speed bump, not a derailment.

Source: Ziggurat Real Estate

UBS sees Philippine growth at low end of 5%-6% goal this year

Philippine economic growth may land at the bottom of the government’s 5% to 6% goal this year as investment slowly recovers from last year’s flood control scandal, UBS Investment Bank Global Research said.

“Growth is near its trough, and we expect quarterly sequential momentum to strengthen to 1.4% over the next two quarters, and GDP (gross domestic product) growth to be 5% in 2026,” it said.

That would top last year’s 4.4% growth, which was weighed down by a corruption scandal that hit investments, household spending and government outlays.

It would also mark a return to the government’s target after three consecutive years of misses. UBS expects public investment to rebound early this year before normalizing toward yearend.

“In our revised forecasts, we assume a gradual and backloaded recovery in public investment, starting with a small uptick in the first quarter of 2026, with spending returning to second-quarter 2025 levels by the fourth quarter of 2026,” it added.

Gross capital formation, the investment component of GDP, fell 2.1% last year after a 10.9% drop in the fourth quarter, the biggest in more than four years.

Economic managers said corruption allegations from last year’s flood mess undermined business and investor confidence.

Across Southeast Asia, UBS expects the six major economies — Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam — to expand by about 4.9% this year.

“The region continues to benefit from deep integration into global manufacturing value chains, supported by a sizable domestic market,” Grace Lim, senior ASEAN (Association of Southeast Asian Nations) and Asia economist at UBS Investment Bank Global Research, said in a statement.

“Conditions for growth remain in place, with household consumption driving momentum in Indonesia, an increase in private investment under way in Thailand and the Philippines, and resilient tech related export strengths in Singapore and Malaysia,” she added.

Remittances, a key source of foreign inflows, could help cushion the economy, but analysts warn that global shocks may pose risks.

The Middle East war is likely to weigh on growth, according to Metropolitan Bank & Trust Co. (Metrobank) Chief Economist Nicholas Antonio T. Mapa.

“For the economy, we’ll likely brace for weaker growth,” he said in a note. “Inflation is expected to breach the target and the central bank’s easing cycle is over.”

The peso-dollar rate is pressured higher as a bloated oil bill means more demand for dollars, he added.

The war could prompt the Bangko Sentral ng Pilipinas to hike rates, ending a nearly two-year easing cycle.

“The war in the Middle East likely means inflation will breach the target, growth will stay at 4% and the next [central bank] move is a hike and not a cut in 2026,” the Metrobank economist separately said in a post on social media platform X.

The Monetary Board last month cut the reverse repurchase rate by 25 basis points (bps) to 4.25%, the lowest since August 2022, trimming key rates by 225 bps since easing began in August 2024.

Singapore-based DBS Bank warned the Philippines might see the highest regional price pressures from oil.

“Amongst the ASEAN-6 countries, the net oil trade balance is most adverse in Thailand, Malaysia and Vietnam (as a percentage of GDP), with the pass-through to price pressures most material in Thailand and the Philippines,” DBS Senior Economist for Eurozone, India and Indonesia Radhika Rao and Senior Economist for ASEAN Chua Han Teng said in a note.

The Department of Energy has warned that oil price increases in the local market would continue as the Middle East war could last weeks.

Since January, pump prices have increased by P6.70 a liter for gasoline, P9.40 for diesel and P7.70 for kerosene.

Source: Business World

BMI keeps 5.2% growth estimate

Fitch Solutions unit BMI has kept its 2026 growth forecast for the Philippines despite the last year’s miss as it expects public and private investments to recover.

BMI sees the Philippine economy expanding by 5.2% this year, unchanged from its earlier projection.

“For now, we are maintaining our 2026 growth forecast at 5.2%, but the lower 2025 base makes this a more pessimistic outlook,” it said in a report.

This is within the government’s 5%-6% growth target for the year.

Philippine gross domestic product (GDP) expanded by 3% in the fourth quarter, slower than 5.3% in the same period a year prior and the revised 3.9% print in the third quarter, the government reported last week.

This was the slowest quarterly print in nearly five years or since the 3.8% contraction in the first quarter of 2021. Outside of the coronavirus pandemic, this was the worst since the 1.8% growth recorded in the fourth quarter of 2009, or during the Global Financial Crisis.

This brought full-year 2025 GDP growth to 4.4%, below the government’s 5.5%-6.5% goal. This was slower than 2024’s 5.7% and was the weakest annual expansion since the 3.9% in 2011, counting out the 9.5% contraction in 2020 due to the pandemic.

Officials said tighter public spending and weak investor confidence due to the flood control scandal continued to drag growth.

BMI said it sees both public and private investments rebounding this year as the government works to ramp up spending and amid the lagged impact of the Bangko Sentral ng Pilipinas’ (BSP) past rate cuts on demand.

“The government probably underspent its capital budget in 2025… Beyond rhetoric from government officials pledging catch-up capital spending, we have not seen any indication of when the Senate investigation into corruption will conclude or when delayed infrastructure projects will be restarted,” it said.

“We would, however, be surprised if policymakers allowed the probe to drag on public capex (capital expenditure) for much longer — a quick recovery in infrastructure spending is necessary to hit the government’s 5-6% growth target for 2026. Our best guess for now is that the government will make up for the underspending of the capital budget in H2 (second half) 2026, with the low base flattering GDP growth in H2.”

It added that household consumption may also rebound this year, with the peso’s weakness to increase the value of remittances from migrant Filipinos.

However, the country’s external sector could weaken as last year’s export strength was largely driven by frontloading ahead of higher tariffs and increased electronics demand due to the artificial intelligence (AI) boom — which are both expected to lose steam this year, BMI said.

“Early indicators are starting to reflect deteriorating external orders… The global semiconductor upcycle appears to have peaked, as firms reassess the returns on AI-driven investments. This will materially affect electronic exports — about 54% of Philippine exports. Accordingly, we expect export growth to moderate as frontloading tapers and the higher 2025 base will mechanically make strong year-on-year growth hard to sustain,” it said.

“Should there be continued delays to infrastructure spending, household spending and exports will not be enough to offset weaker public spending, posing downside risks to our forecast. Inflation may also run hotter than we forecast if oil prices get another boost from rising geopolitical risks, limiting the BSP’s room for rate cuts.”

BMI expects the Monetary Board (MB) to deliver 50 basis points (bps) in cuts this year.

For its part, Deutsche Bank Research said the “surprise” growth slowdown last quarter increases the odds of a sixth straight rate cut by the BSP this month.

“We think that a February rate cut from the BSP is now almost certainly ‘on the table,’” it said in a report.

“We also see a rising likelihood of another rate cut in H1  (first half) given the likely wider-than-expected negative output gap,” it added “We will refresh our view pending more up-to-date data from 2026, including inflation, government disbursements, and BSP’s guidance in the February MB meeting.”

BSP Governor Eli M. Remolona, Jr. said on Sunday that a cut is possible at their Feb. 19 policy review if the fourth-quarter GDP slowdown proves demand-driven.

“If we can help on the demand side and still keep inflation low, then of course we’ll help,” he said.

He added that they will continue to assess the available data and decide “one meeting at a time.”

The Monetary Board has slashed benchmark borrowing costs by 200 bps since August 2024, bringing the policy rate to 4.5%.

Source: Business World