Economy to slow down until 2026

S&P, AMRO trim Philippines growth forecast

MANILA, Philippines — The Philippine economy is widely expected to perform below par this year and in 2026 amid domestic and external headwinds, according to international research and analysis agencies.

In the latest economic outlook report of New York-based S&P Global Ratings, it said the Philippine economy is projected to grow below government’s target until 2026, as the ongoing flood control scandal, public protests and softer interest rates have put pressure on the local currency and constricted foreign capital entering the country.

“In Indonesia and the Philippines, recent public protests have weakened their respective currencies alongside lower interest rates, which have deterred capital inflows,” the credit watcher said.

By year-end, S&P is projecting the country’s gross domestic product (GDP) growth to settle at 4.8 percent, which is within the 4.7 to 4.8 percent estimate made by former finance chief and now Executive Secretary Ralph Recto.

Likewise, the Association of Southeast Asian Nations Plus 3 Macroeconomic Research Office (AMRO) has lowered its growth forecasts for the Philippines for this year and the next.

In its Annual Consultation Report for the Philippines 2025, the regional think tank said it expects the country’s economic growth to moderate this year and the next from last year’s 5.7 percent.

“Real GDP is expected to grow by 5.2 percent in 2025 and 5.3 percent in 2026,” AMRO said.

Both forecasts are lower than the growth projections provided by AMRO for the Philippines in its report released last month.

Previously, AMRO said it expects the Philippines to post 5.6 percent growth this year and 5.5 percent next year.

The new growth forecasts are below the government’s 5.5 to 6.5 percent target for this year and six to seven percent goal for next year.

AMRO said private consumption is expected to grow this year and the next, supported by favorable labor market conditions, lower inflation and stable overseas remittances.

“However, private investment sentiment and export performance are likely to be clouded by external uncertainties arising from the new US tariff policy, while public investment will be dampened by flood control project controversies,” AMRO said.

While the tariff impact on exports is expected to be offset by frontloading of shipments this year, the effect is expected to be more pronounced next year.

AMRO said the effects on investment and exports, however, are likely to be gradually phased out in the second half of 2026.

It also said inflation is expected to average 1.7 percent this year and rise to 3.2 percent in 2026, returning within the Bangko Sentral ng Pilipinas’ (BSP) target range of two to four percent.

S&P said hitting the 4.8 percent pace marks the lowest growth in four years when the economy contracted by 9.5 percent in 2020. Excluding the pandemic, it will be the lowest since 2011’s 3.9 percent GDP expansion.

The Cabinet-level Development Budget Coordination Committee (DBCC) is expected to revise the 5.5 to 6.5 percent growth target for this year, including revenue goals, due to the slower-than-expected growth.

In the first quarter this year, GDP grew by 5.4 percent, followed by a 5.5 percent expansion in the second quarter but slowed to four percent in the third quarter amid concerns of alleged corruption in the public works department.

S&P is projecting a 5.7 percent growth for 2026, below the current DBCC target of six to eight percent from 2026 to 2028. In comparison to other countries, the Philippines will lag behind Vietnam and India that are both expected to post 6.7 percent growth next year.

For the peso-dollar exchange rate, the credit watcher is assuming that peso will settle at 58.3 to a dollar.

On Nov. 12, the peso closed at its weakest level of 59.19, with some economists expecting the local currency to settle between 59 and 60 by year-end.

Meanwhile, the University of Asia and the Pacific (UA&P) said in its The Market Call - Capital Markets Research report released yesterday that it expects the economy to grow by 5.3 percent in the fourth quarter, faster than the four percent growth posted in the third quarter.

UA&P also said it expects full-year GDP growth at 5.1 percent this year as the national government resumes its spending and consumers use healthy remittance inflows for the holiday season celebration.

“President Marcos has indicated potential convictions regarding the flood control scandal before Christmas, bolstering confidence thereafter,” UA&P said.

UA&P also expects inflation to average 1.7 percent this year before moving into 2.2 percent by 2026.

“This weaker growth outlook will provide a strong case for a December rate cut from BSP, which could see the peso hover around 58.5:$1 by year-end, as usual OFW (overseas Filipino workers) inflows bloat for the Christmas holidays,” UA&P said.

GDP growth averaged five percent in the January to September period.

Department of Economy, Planning and Development Secretary Arsenio Balisacan earlier said while hitting even the low end of the growth target for this year would be challenging, the setbacks are temporary and the economy is expected to rebound in 2026.