Weak growth momentum to spill into 2027–BMI

The Philippine economy may have to wait until 2027 for a meaningful growth recovery, but weak momentum from this year is expected to spill into next year and limit the pace of the rebound, according to BMI.

In a commentary, the Fitch Solutions unit said it cut its 2026 growth forecast to 2.6 percent from 3 percent following the weaker-than-expected third-quarter economic performance, when growth slowed to 2.1 percent and fell short of market expectations for a pickup.

For 2027, BMI also lowered its growth forecast to 4 percent from 4.5 percent. While this would mark an acceleration from 2026, it would still settle below the Marcos administration’s target growth rate of 5 to 6 percent for next year.

“Sluggish consumption will cap near-term economic recovery,” BMI said, citing stubbornly high inflation, which soared to a more than three-year high of 7.8 percent in October.

“This will continue to erode household purchasing power and dampen spending. The lagged effects of monetary tightening should also become more pronounced in the coming months, with higher borrowing costs constraining demand. Weaker labor market conditions and a deeply negative consumer confidence will further limit the rebound,” it added.

More so, public infrastructure spending contracted for the sixth consecutive quarter in the third quarter, although the 15.1-percent decline was a significant improvement from the 33.4-percent contraction in the previous period.

Prolonged spending delay

“The normalization of public capex is key to the economic recovery. However, the ongoing corruption investigation could prolong spending delays into 2027 and weaken the growth rebound,” BMI said.

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The think tank said public spending would only begin to recover meaningfully in 2027, providing support to economic growth alongside strong demand for artificial intelligence that is expected to fuel technology exports.

Still, risks including renewed tensions in the Middle East, mounting El Niño effects and repeated typhoon disruptions could further weigh on economic growth.

“Mounting economic headwinds should increase the government’s incentive to accelerate capital spending and resume construction projects. Nevertheless, we expect a sharper recovery to materialize only in 2027 rather than Q4 2026,” BMI said.