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