Macro backdrop: Stabilizing growth, fragile confidence
From AB Capital's The Opening Bell: Three Moves
Event
The Philippine economy enters 2026 on firmer macro footing after a turbulent 2025. Inflation averaged just 1.6% and should normalize to around 2.8% this year, while GDP growth is projected to rebound to 5.3% after last year’s slowdown.
View
Faster fiscal execution is a potential upside catalyst, though constraints are real. With the deficit near 6% of GDP and debt at 63%, growth slippage could quickly weaken fiscal ratios. A 1-pp shortfall in nominal GDP may raise the debt ratio by 0.5–0.7pp.
Catalyst
Monetary policy will stay cautiously accommodative. After 125bps of cuts in 2025, we expect another 50bps this year. But BSP’s room depends on external conditions i.e. if the Fed delays easing, a tighter differential risks capital outflows and renewed pressure on the Php which is now above P59.
Action
The improving macro baseline supports selective risk-taking, but positioning should reflect fragile sentiment. We prefer sectors most leveraged to fiscal catch-up and easing liquidity, while remaining defensive around FX-sensitive names given the Php’s historical vulnerability when the Fed-BSP gap narrows.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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