Philippines growth outlook dims as Nomura, BMI cut forecasts

MANILA, Philippines — The Philippine economy is expected to grow by just 2.6 to three percent this year, well below government expectations, as stubborn inflation, weak consumer spending and delayed infrastructure projects threaten to prolong the slowdown into 2027.

Nomura lowered its 2026 gross domestic product (GDP) growth forecast to three percent from 3.8 percent, while BMI, a unit of Fitch Solutions, trimmed its projection to 2.6 percent from three percent.

Both estimates fall below the government’s 3.5 to 4.5 percent growth target.

BMI also cut its 2027 forecast to four percent from 4.5 percent, citing expectations of a slow recovery.

GDP measures the total value of goods and services produced in the country. It grew by just 2.1 percent in the third quarter, slower than the revised 2.4 percent in the preceding quarter and the weakest reading since early 2021.

Growth averaged 2.5 percent in the first nine months.

“We expect the weak momentum to carry over into 2027,” BMI said, warning that elevated inflation, higher borrowing costs and subdued consumer confidence would continue to weigh on demand.

Inflation accelerated to 7.8 percent in October, reducing households’ purchasing power. Consumer spending growth slowed to 2.4 percent in the third quarter from 2.9 percent previously.

BMI also warned that adverse weather and El Niño could further disrupt agriculture after farm output contracted by 4.8 percent in the third quarter, potentially undermining rural incomes and consumption.

The research firm expects a stronger recovery only in 2027, when government infrastructure spending could gain momentum. However, ongoing investigations into questionable flood-control projects could prolong delays.

Nomura was more optimistic about the near-term outlook, forecasting fourth-quarter growth above four percent as public spending accelerates and the economy benefits from a low comparison base a year earlier.

It noted that fixed investment contracted by a smaller 4.4 percent in the third quarter, compared with 13.7 percent in the second, suggesting that construction and equipment spending were beginning to stabilize.

Still, Nomura said the combined effects of energy-price pressures and infrastructure-related governance concerns had made the Philippines “the region’s big underperformer this year.”

BMI expects technology exports, supported by demand linked to artificial intelligence, to provide some relief through 2027.

However, both firms see the pace of infrastructure spending and the direction of inflation as crucial to the recovery.