Philippine economy likely to expand by 5.3% in 2026

The Philippine economy is likely to grow by 5.3% this year, driven by robust domestic demand, although private investment risks persist amid the graft scandal, the ASEAN+3 Macroeconomic Research Office (AMRO) said.

In its latest Regional Economic Outlook quarterly update, AMRO sees Philippine gross domestic product (GDP) expanding by 5.3% in 2026, unchanged from its annual consultation report released in November.

This is still within the government’s revised 5-6% GDP growth target for 2026.

“The picture for the Philippine economy is that it has been quite steady, but there are some headwinds against (this outlook) on the investment side,” AMRO Chief Economist Dong He said in a virtual news briefing on Wednesday.

“Private investment of course, needs to be supported by investor confidence, and the public investment had been affected by some of the, for example, flood control controversy,” Mr. He said.

If realized, the Philippines is expected to be the second fastest-growing economy in Southeast Asia this year, after Vietnam’s 7.6%.

The country’s growth will likely outpace Cambodia (5.1%), Indonesia (5%), Laos (4.6%), Malaysia (4.4%), Singapore (3%), Myanmar (2.5%), Thailand (1.7%), and Brunei (1.6%).

The Philippines’ GDP growth would also be above the region’s average growth of 4.6% for 2026.

For 2025, AMRO said the Philippine economy likely grew by 5.2%, falling short of the government’s 5.5-6.5% target.

Mr. He also noted that the “fairly weak” third-quarter growth in 2025 prompted a downgrade in forecasts from the October update.

A flood control corruption scandal has weighed on growth, investor confidence and consumption.

In the third quarter, GDP grew by 4%, the weakest growth in over four years, bringing the nine-month average to 5%.

Fourth-quarter and full-year 2025 GDP data will be released on Jan. 29.

Mr. He said private consumption, which accounts for over 70% of the economy, will continue to remain firm, but the corruption scandal hit the investment side, he added.

Meanwhile, AMRO kept its headline inflation forecast for the Philippines at 3.2% this year, matching the Bangko Sentral ng Pilipinas’ (BSP) full-year projection.

Inflation settled at 1.7% in 2025, the slowest pace in nine years or since 2016.

MAIN RISKS

Meanwhile, AMRO said climate-related risks and artificial intelligence (AI), which put pressure on the country’s service exports sector, are the two main risks for the Philippine economy.

Mr. He also said that while the economy has expanded “steadily,” growth remains below its pre-pandemic trajectory.

“What’s important is really to strengthen governance, strengthen investor confidence, and prioritize investments or prioritize public spending so the economy will become more resilient (against the main risks),” he said.

Last week, the government unveiled “big bold reforms” before the private sector to counter the slide in investor confidence amid a corruption scandal.

Mr. He said these risks highlight the need to upgrade human capacity and human capital to suit the AI age, as well as strengthen infrastructure to make it resilient amid natural disasters.

“In order to maintain resilience and even aim higher to go back to earlier trajectory of growth, we think that the public policies should really focus on strengthening resilience, particularly in light of the two main risks facing the Philippines in the longer term,” he added.

AMRO added that in the near term, authorities have room to ease monetary policy and deploy fiscal support to help the economy.

“I think in terms of policies, of course, in the short term if there are shocks that hit the economy, monetary policy and fiscal policy would be the first policy instruments that the government can use,” he said.

The BSP has reduced its benchmark rate by a total of 200 basis points since August 2024, bringing the policy rate to a more than three-year low of 4.5%.

REGIONAL GROWTH TO MODERATE

Meanwhile, the ASEAN+3 region is projected to grow by 4% this year, moderating from the regional growth forecast of 4.3% in 2025 amid softer external demand.

ASEAN+3 includes the 10 Association of Southeast Asian Nations (ASEAN) member states plus China, Hong Kong, Japan and South Korea.

ASEAN is forecast to expand by 4.6% this year, slightly slower than 4.8% estimate in 2025.

“While domestic demand is projected to remain firm and continue supporting growth, higher US tariffs and persistent policy uncertainty are expected to weigh on external demand, leading to more moderate growth in 2026,” AMRO said.

The US began imposing a 19% reciprocal tariff on many goods from the Philippines, Cambodia, Malaysia, Thailand, and Indonesia in August 2025.

The think tank noted that overall risks to the regional outlook have become “more balanced,” though downside risks persist and uncertainty continues to rise.

AMRO also flagged five downside risks that could weigh on the region’s baseline forecast for 2025 to 2026, including heightened protectionist measures and a potential slowdown in technology demand.

It also warned that further escalation of US trade measures may dampen regional activity, amid concerns that tariffs will be imposed on sectors currently exempted, such as semiconductors.

Other factors that could undermine regional growth in the near term include potential slowdowns in major economies, surging global commodity prices, and increased financial market volatility.

AMRO said long-term risks include geoeconomic confrontation and policy uncertainty from geopolitical tensions, failure of climate change mitigation and adaptation, natural disasters, and extreme weather events.

It added that cyber insecurity, frontier technology risks, weak preparedness for infectious disease outbreaks, and inadequate planning for an aging population could further weigh on the region in the long run.

Despite these risks, the AMRO noted potential upside, such as strong global semiconductor demand and sustained foreign direct investment (FDI) commitments.

“Strong technology demand and robust FDI inflows into emerging sectors, including advanced electronics, electric vehicles, and digital services, have helped cushion growth despite ongoing tariff headwinds,” Mr. He said.

Source: Business World

Infrastructure spending boost seen key to faster PH growth in 2026

A recovery of government infrastructure spending after a deep slump triggered by the flood control scandal would be the most effective way to accelerate growth, ANZ Research said, arguing that the boost from interest rate cuts is still debatable in an environment of weakening confidence.

In a note to clients, Sanjay Mathur, ANZ’s chief economist for Southeast Asia, said that while the Bangko Sentral ng Pilipinas (BSP) may opt for one last final rate cut to support the economy, there are repercussions from the graft fallout that may not be effectively addressed through monetary policy easing.

“There has been a downshift in the growth in the Philippines as repercussions from governance-related issues in public infrastructure projects have not receded,” Mathur wrote. “The resulting weakness in public spending, particularly on the capital side, has permeated into the household and business sectors.”

“The efficacy of the monetary policy easing cycle against the backdrop of low household and business confidence is debatable,” he added. “In our view, a revival in government spending is the most appropriate pathway to faster growth.”

Lowered growth target

Earlier this month, economic officials in the Marcos administration trimmed their 2026 growth target to 5 to 6 percent, from the previous goal of 6 to 7 percent, underscoring the economic costs of the sweeping investigation into anomalous flood control projects.

ANZ’s Mathur estimated that growth in the fourth quarter of 2025 may have settled at a “sub-potential” rate of 4.5 percent, which, he said, is likely to validate the need for an additional cut in the policy rate.

To help “compensate” for the effects of the graft fallout, the BSP cut its benchmark rate by a quarter point to 4.5 percent last December, bringing total reductions since the easing cycle began in August 2024 to two percentage points.

Source: Inquirer

Listed property firms seen posting modest revenue growth this year

Listed property companies in the Philippines are expected to post modest revenue growth this year amid tepid economic expansion and elevated inventory in the office and residential segments, analysts said.

“Revenue trajectory [is] on the way to recovery, but the journey can be challenged by moderating gross domestic product growth this year and the oversupply overhang in some segments like office and high-rise residential,” First Metro Investment Corp. Head of Research Cristina S. Ulang said.

The government has lowered its economic growth target for this year to 5%-6% from the previous 6%-7% range set for 2026 to 2028.

This came after a corruption scandal involving flood control projects dampened government spending and consumer confidence in the latter half of 2025.

Ms. Ulang also cited the oversupply of office and vertical residential units in some areas, which could weigh on listed developers’ revenue growth.

The Metro Manila office market has about 2.7 million square meters of vacant supply, while 80,300 condominium units remain unsold in the region, according to Leechiu Property Consultants’ fourth-quarter property market report.

Unicapital Securities, Inc. Research Head Wendy B. Estacio-Cruz said modest revenue growth is expected this year as the sector has yet to fully recover from tempered demand following a prolonged period of high interest rates.

In December, the Bangko Sentral ng Pilipinas (BSP) cut policy rates by 25 basis points (bps) to a more than three-year low of 4.5%. This marked the BSP’s fifth consecutive 25-bp reduction, bringing total rate cuts to 200 bps since August 2024.

BSP Governor Eli M. Remolona, Jr. recently signaled that the Monetary Board is nearing the end of its easing cycle.

However, Ms. Estacio-Cruz said interest rates remain relatively elevated and may continue to weigh on housing affordability, particularly in the mid- to mass-market segments.

Rising land, construction, and financing costs may also delay project launches, she added.

“Leasing assets in prime locations should remain resilient, while upper-mid to high-end residential projects are likely to drive sales, given their relative resistance to interest rate pressures,” Ms. Estacio-Cruz said.

As a result, developers are expected to rebalance their revenue mix this year, analysts said.

The country’s industrial and logistics sector also presents revenue opportunities for listed firms, particularly amid the growth of e-commerce, data centers, and cold storage facilities, First Grade Finance, Inc. Managing Director Astro C. del Castillo said.

Developers with hospitality and retail assets may also post steady profits, he said, supported by an influx of local and international events scheduled this year.

Sy-led SM Prime Holdings, Inc. reported a 10% increase in net income to P37.2 billion for the first nine months of 2025.

Ayala Land, Inc.’s nine-month profit rose slightly to P21.4 billion from P21.2 billion a year earlier.

Robinsons Land Corp. posted a 2% increase in attributable net income to P10.17 billion for the period.

Megaworld Corp. recorded a 16% rise in attributable net income to P15.93 billion.

Federal Land, Inc. posted a 6% increase in nine-month reservation sales, while Filinvest Land, Inc. reported a 5% rise in consolidated net income to P3.64 billion.

Century Properties Group, Inc. saw its nine-month net income climb 17% to P2.1 billion, while DoubleDragon Corp.’s consolidated net income edged up to P2.55 billion.

Cebu Landmasters, Inc. posted a 6% increase in consolidated net income to P3.1 billion, while Vista Land & Lifescapes, Inc. recorded a 4% rise to P9.46 billion for the first nine months of 2025.

Rockwell Land Corp. posted a 13.1% increase in consolidated net income to P3.5 billion as of end-September, while Sta. Lucia Land, Inc.’s net income fell 38% to P2.05 billion during the period.

“In our view, topline performance will be supported by improving leasing conditions, a gradual recovery in residential sales, and the increasing contribution of recurring income streams,” Ms. Estacio-Cruz said.

Source: Business World