World Bank cuts Philippine growth forecasts until 2027

The World Bank on Tuesday trimmed its growth forecasts for the Philippines for this year through 2027, mainly due to slower construction activity, muted consumption and a sharper drag from US tariff policy.

In its latest Philippines Economic Update (PEU), the multilateral lender cut its Philippine gross domestic product (GDP) growth forecast to 5.1% for this year from 5.3% in its June report.

For 2026, it lowered its Philippine GDP growth forecast to 5.3% from 5.4% previously.

The World Bank also cut its Philippine GDP growth projection for 2027 to 5.4% from 5.5% previously.

These latest projections are below the government’s 5.5-6.5% growth goal for this year and the 6-7% target for 2026 to 2028.

“We project that average growth over 2025 to 2027 will be lower than 2024,” World Bank Senior Economist Jaffar Al-Rikabi said during a briefing.

The Philippine economy grew by 5.7% in 2024.

“For 2025… the growth is largely weighed down by domestic factors. In particular, lower construction activity and weaker consumption growth,” he said.

The Philippine economy expanded by a weaker-than-expected 4% in the third quarter, bringing nine-month growth to 5%. This, as household final consumption expenditure and government spending slowed amid the corruption mess.

“But for 2026 to 2027, we think that it’s likely that external factors will weigh in more heavily on growth, largely slower export demand,” Mr. Al-Rikabi said.

The US imposed a 19% tariff on most goods from the Philippines starting August.

“The Philippines can leverage its strong economic foundation to implement bolder reforms that can unlock faster, more inclusive growth,” Zafer Mustafaoğlu, country director for the Philippines, Malaysia, and Brunei said.

“Removing barriers that limit investment and productivity and strengthening competitiveness can create more and better-paying jobs, expand opportunities, and reinforce economic resilience.”

Source: Business World

Lackluster GDP to impede property’s recovery

The third quarter gross domestic product (GDP) growth of the Philippines was a disappointing 4% — due mainly to tempered household consumption as well as constricted government infrastructure spending. The third quarter (Q3) 2025 GDP growth was the weakest quarterly economic expansion recorded since the third quarter of 2011, a period that also saw slower spending due to corruption allegations involving public projects.

While Q3 is historically a slow quarter, the sharp slowdown was worse than what economists projected. Average GDP growth for 9M 2025 is now at 5%, even lower than the 5.5% to 6.5% estimate of the country’s economic managers. Hence, it is no longer surprising to see credit rating agencies and multilateral aid agencies also downgrading their growth forecast for the Philippines for 2025.

Colliers Philippines is still hoping for a strong finish for the property sector. Fourth quarter is traditionally a strong period for retail spending due to higher remittances and disbursement of holiday bonuses for public and private sector employees.

Greater purchasing power supported by attractive ready for occupancy (RFO) promos should also help lift demand for residential units, especially mid-income (P3.6 million to P12 million a unit) condominiums primarily targeted by developers’ “renter to owner” schemes.

The office market has so far surpassed initial projections for 2025, but stakeholders are on the lookout for anti-outsourcing measures that might impede the Philippine business process outsourcing (BPO) sector’s growth beyond 2025.

SLOWEST QUARTERLY GROWTH SINCE Q3 2011

In Q3 2025, the Philippine economy expanded by 4%, the slowest since the 3.8% contraction in Q3 2011. As of 9M 2025, average GDP reached 5%, lower than the government’s full year target of between 5.5% and 6.5%. The country remains one of the fastest growing economies in Southeast Asia in 9M 2025, next to Vietnam’s 7.7%.

Steady GDP expansion is essential for the country to generate decent jobs and ensure growth in individual incomes. Improving workers’ purchasing power is crucial in fueling residential demand.

CENTRAL BANK EASES RATES FURTHER, INFLATION HOLDS STEADY

The Bangko Sentral ng Pilipinas (BSP) or central bank cut its policy rate for the fourth straight meeting, reducing the benchmark rate by another 25-basis points (bps) to 4.75% in October, the lowest since September 2022.

The central bank noted that inflation outlook remains within the target range of 2% to 4% but highlighted the weaker economic outlook and the decline in business confidence as key reasons for further rate cuts.

Since August 2024, the central bank has cut a total of 175 bps.

Inflation reached 1.7% in October 2025, an easing from 2.3% a year ago. As of 10M 2025, average inflation reached 1.7%, below the government’s 2%-4% target range.

SHIFTING GEARS BEYOND 2025

The office and residential markets are now starting to move sideways in the property cycle. With substantial correction in office rents at the height of the pandemic, Colliers is hopeful that recent tailwinds in the office market will result in gradual recovery in lease rates within and outside Metro Manila.

It appears that property developers have finally accepted what needs to be done to revive the Metro Manila vertical market, especially the mid-income segment which is now the focal point of developers’ RFO promos. The retail segment continues its aggressive recovery post-covid, with strong absorption and limited new retail space resulting in drop in vacancy and rise in rents.

The Q3 results point to a need for massive pump-priming from the government. Continued slowdown in government’s infrastructure program will likely result in a Philippine economy grinding to a halt — so it is crucial that private personal consumption expenditures in Q4 are supported by ramped up public sector spending.

With the current market dynamics, it’s obvious that the Philippine economy and property are still moving, but not sprinting. Until we see sweeping governance reforms and an eventual return of private investor confidence, we’re bound to see property opportunities not exactly shouting, but whispering.

Source: Business World

Return to growth expected in 2027

Monetary authorities expect economic growth to return to target in 2027 with the Philippines again expected to underperform this year and the next, highlights of last month’s policy meeting showed.

Gross domestic product (GDP) growth will likely “fall slightly below the government’s growth targets for 2025 and 2026,” mainly due to the impact of recent storms on agriculture, weaker construction activity and reduced demand for services, “before rising to within target by 2027.”

Policymakers also tagged an ongoing corruption scandal as possibly dampening investment sentiment and infrastructure project implementation, and said that continued uncertainties over US tariffs “also warrants continued monitoring.”

An effort to reduce fiscal leakages, they said, could help alleviate downside risks to growth from slower government spending by boosting budget efficiency and the economy’s prospects over the longer term.

GDP growth slumped to 4.0 percent in the third quarter from 5.5 percent in April-June, well below the 2025 goal of 5.5-6.0 percent and all but cementing a third straight year of below-target results.

Growth was higher last year at 5.7 percent but missed the objective of 6.0-6.5 percent. A year earlier it was 5.5 percent, also below the 6.0-7.0 percent goal. The economy last outperformed in 2022 when it topped the 6.5- to 7.5-percent target by growing 7.6 percent.

Economic managers will be reviewing their assumptions next week and the 2025 GDP goal is expected to be revised downwards. The 6.0- to 7.0-percent target for 2026 to 2028, meanwhile, could also be changed.

The Bangko Sentral ng Pilipinas’ policymaking Monetary Board lowered key interest rates for a fourth straight meeting last Oct. 9, citing softer GDP growth prospects and a benign inflation outlook.

With price growth expected to remain within expectations and following the third-quarter GDP slowdown, another cut is widely expected to be announced on Dec. 6.

Average inflation is expected to settle below the 2.0- to 4.0-percent target range at 1.7 percent this year. The forecasts for 2026 and 2027 were also lowered to 3.1 percent and 2.8 percent, respectively, last month from 3.3 percent and 3.4 percent in August.

The projected rise will be due to changes in the country’s rice policies and base effects, the highlights of last month’s meeting stated. Lower global oil prices are expected to offset higher power prices and the “risks to inflation are seen to be limited as price pressures continue to ease.”

“On balance, the favorable inflation outlook and moderating domestic demand provided scope for a more accommodative monetary policy stance to support economic activity,” the highlights state.

“Future monetary policy adjustments will continue to be guided by evolving risks to inflation and growth.”

The BSP’s policy rate currently stands at 4.75 percent following last month’s 25-basis point reduction.

Source: Manila Times