Growth outlook slashed

Economy now seen expanding by just 5.2% next year

Philippine economic growth will continue to lose momentum next year as both household spending and investments cool, a Fitch Group unit said.

“Headwinds to growth are mounting,” BMI Country Risk & Industry Research said as it cut the 2026 growth forecast for the country to 5.2 percent from 6.2 percent.

That for 2025 was kept at 5.4 percent — lower than the 2024 result of 5.7 percent — and growth is also expected to slow in the last six months of the year.

Both forecasts fall below the government’s 5.5- to 6.5-percent target for this year and 6.0-7.5 percent for 2026. If realized, growth will have fallen below target for four straight years.

“Growth in H1 2025 was driven by front-loading activity and robust domestic consumption. However, we expect growth to slow in H2 2025,” BMI said in an Oct. 22 commentary.

“Investment is likely to stay subdued in H2 given the uncertain global environment and weak infrastructure spending.”

An ongoing corruption scandal was said to have worsened investor sentiment, with BMI noting that the Philippine Stock Exchange index had fallen to a near six-month low last Sept. 30.

Manufacturing activity has also shown signs of strain, with the purchasing managers’ index contracting for the first time in six months in September.

Exports, meanwhile, sharply slowed in August from a month earlier.

‘Outsized impact’

As for 2026, BMI said that remittance growth was likely to slow due to tighter United States immigration policy and a 1-percent tax.

“A slowdown in remittances will weigh on domestic consumption, which will have an outsized impact on growth given the domestically driven economy,” it said.

The trade balance also expected to worsen given a US-Philippines deal that imposed a 19-percent duty on Philippine exports and none on American goods.

Erratic US trade policies and global uncertainty, BMI added, are seen constraining foreign direct investment flows into the country.

The Fitch unit cautioned that the risks to its forecast were tilted to the downside.

“Should the ongoing probe uncover corruption across other infrastructure projects beyond flood control, it could lead to even tighter scrutiny on government spending and reduce spending substantially below fiscally programmed levels,” it said.

The economy has underperformed so far for the year, averaging just below the 5.5- to 6.5-percent target as of end-June following 5.4-percent and 5.5-percent results in the first two quarters.

Preliminary third-quarter growth data will be released on Nov. 7, and economic managers have warned of a slowdown due to government spending having slowed due to the corruption mess.

BMI expects growth to rebound to 6.2 percent in 2027 and 6.3 percent in 2028.

Deficit to narrow

The Fitch unit, in a separate Oct. 22 commentary, also said that the country was likely to post a narrower fiscal deficit with spending having fallen below target.

BMI said the shortfall was likely to hit 5.5 percent of gross domestic product this year, down from 5.7 percent in 2024, and ease further to 5.4 percent next year.

While revenue collections have exceeded average monthly targets since the start of the year up to August, spending over the same period was behind programmed levels due to an election ban and weak infrastructure disbursements.

The spending shortfall will likely narrow but still undershoot the 2025 budget, BMI said, noting that Budget Secretary Amenah Pangandaman has warned of a slowdown due to the corruption mess.

Government infrastructure spending slowed by 5.6 percent to P798.4 billion as of end-August from P845.3 billion recorded last year, Budget department data showed.

Budget officials said the infrastructure project implementation will likely accelerate in the fourth quarter with the typhoon season over, and ”payment of progress billings may also start to normalize in the latter part of the year as internal controls have been put in place” by the Public Works department.

Fiscal consolidation will remain slow next year, BMI said, with tax collections unlikely to keep up with next year’s proposed P6.79-trillion government budget.

Tariff collections are also expected to fall due to the trade deal with the US.

‘Fiscally unfeasible’

Next year’s fiscal deficit forecast, BMI said, is supported by a “one-off privatization” — equivalent to 0.3 percent of gross domestic product — planned by the government.

“We think that this is fiscally unfeasible over the long run,” it said.

BMI noted that the Philippines’ public finances remain fragile with the debt-to-GDP (gross domestic product) ratio hovering around 60 percent, significantly above the pre-pandemic level of 40 percent.

“Elevated borrowing costs and a narrow revenue base further limit Manila’s ability to deliver large-scale fiscal support without compromising debt sustainability,” it added.

Debt-to-GDP ratio as of end-June, meanwhile, had climbed to 63.1 percent from 62 percent in the previous quarter and 60.9 percent a year earlier. It also exceeded the 60-percent threshold that multilateral lenders consider manageable for developing economies.

Source: Manila Times

Typhoons could slow PHL growth

The Philippine economy could face stronger inflationary pressures and slower growth as increasingly frequent and severe typhoons disrupt supply chains and farm production, the International Monetary Fund (IMF) said.

“The Philippines is highly exposed to natural hazards, particularly typhoons, which are the most frequent and costliest climate shocks in the country,” the IMF Regional Office for Asia and the Pacific said in a Facebook post. “These events represent supply shocks, creating inflationary pressure and reducing economic activity.”

The IMF estimated that a Category 5 storm could raise headline inflation by 0.4 percentage point (ppt) and food inflation by 0.7 ppt, based on regional data from its latest Article IV consultation with Manila.

Super Typhoon Ragasa, locally named Nando, was one such storm that battered the country late last month, causing floods and an initial P1.38 billion in agricultural damage.

Data from the Department of Agriculture showed that the southwest monsoon and typhoons Mirasol, Nando and Opong have caused P7.71 billion in combined losses. Farmers and fisherfolk lost 472,701 metric tons in production and 205,016 hectares of farmland.

The IMF said such weather shocks could drag agricultural labor productivity by as much as 2.5% and shave 0.4 ppt off economic growth, with estimated damage amounting to about 0.2% to 0.3% of gross domestic product (GDP).

Inflation accelerated to 1.7% in September from 1.5% in August, the fastest in six months, the Philippine Statistics Authority said. While slower than 1.9% a year earlier, the pickup reflected higher food prices after recent typhoons.

The agency said vegetable prices rose 19.4% in September, up from 10% in August — the steepest increase since January. Food inflation climbed to 0.8% from 0.6% in the previous month.

Average inflation this year stands at 1.7%, matching the Bangko Sentral ng Pilipinas’ (BSP) full-year target but slightly above the IMF’s 1.6% forecast.

The economy expanded by 5.4% in the first half, slower than last year’s 6.2% but in line with the IMF’s full-year outlook.

Economy Secretary Arsenio M. Balisacan said growth might soften further in the third quarter due to typhoon-related disruptions but could still meet the lower end of the government’s 5.5% to 6.5% goal. The third-quarter GDP data will be released on Nov. 7.

The IMF said monetary authorities should carefully balance inflation control with the need to support growth after natural disasters. “Post-disaster, monetary policy must carefully weigh trade-offs between anchoring inflation expectations and supporting economic recovery,” it said.

The BSP delivered its fourth straight 25-basis-point (bp) rate cut on Oct. 9, bringing its benchmark rate to a three-year low of 4.75%. It has reduced borrowing costs by 175 bps since August 2024.

“Fiscal policy is central to building climate resilience before disasters strike, to help mitigate the macro impacts of natural disasters,” the IMF added.

Source: Business World

Slowing population growth opens window for faster economic growth

As the Philippines’ population growth rate has drastically slowed down, the country now has a window of opportunity to experience faster economic growth, as the working population makes up a larger share of the total population, according to an expert.

“We have an opportunity to experience an economic growth that we have not seen before or could not have imagined,” said Jose “Oying” G. Rimon II, founding director of the William H. Gates Sr. Institute for Population and Reproductive Health at Johns Hopkins University’s Bloomberg School of Public Health. He said at the sidelines of the National Population, Health and Environment Conference.

“This will happen if we do the right policies and the right investment. The right investment must be in education and in health,” Mr. Rimon added.

According to the Philippine Statistics Authority (PSA), the country’s population growth rate (PGR) slowed to 0.8% annually between 2020 and 2024, from 1.63% in the 2015–2020 period.

Mr. Rimon said the lower population growth rate could lead to a decline in the young dependent population (aged 14 and below) and an increase in the working-age population, which could further support economic growth, a trend referred to as the demographic dividend.

According to the Philippine Statistics Authority (PSA), the share of the working-age population rose by one percentage point to 64% in 2020 from 63% in 2015, while the proportion of the young dependent population declined to 31% from 32% over the same period.

Meanwhile, the ASEAN+3 Macroeconomic Research Office (AMRO) said the Philippines recorded the third-fastest average growth in its working-age population at 2.27%, behind Malaysia (2.41%) and Laos (2.39%).

Mr. Rimon said the demographic dividend in the Philippines is expected to last for about 25 years—a period the government must maximize, as neighboring countries like China, Singapore, and Malaysia achieved significant growth during similar windows.

To maximize this window of opportunity, he said the government must invest in quality education, particularly by strengthening the country’s technical-vocational programs and specialized schools, especially those focused on technology.

He also emphasized the need for smoother internship programs for emerging talents.

To further expand the country’s universal healthcare access, Mr. Rimon said the Philippines could also check how government health insurance systems operate abroad.

To further expand the country’s universal healthcare access, Mr. Rimon said the Philippines could also study how government health insurance systems operate abroad. He added that the government must also ensure the health and well-being of the young dependent population.

Source: Business World