Early budget release seen to push Q1 GDP above 5%

In this photo taken on July 22, 2018, residential (L) and informal settlers (R) areas are pictured against the backdrop of Manila's financial district of Makati. —AFP FILE PHOTO

The Philippine economy might bounce back to the 5-percent level in the first quarter of 2026 on the back of early budget releases to local government units and softer inflation.

In their latest “The Market Call” report, economists at the University of Asia and the Pacific (UA&P) said they had been “wrong-footed” by positive economic indicators that had led them to forecast faster growth in the fourth quarter of 2025.

Despite this, they still expect the Philippine gross domestic product (GDP) growth rate to come in above 5 percent for the first quarter and the full year of 2026.

“We expect a strong rebound starting Q1-2026 with the early P1.6 trillion (some 25 percent of budget) release to local government units and our projected inflation average of 1.4 percent in Q1,” they said.

UA&P’s forecast is more upbeat than the government’s outlook. Economic Planning Secretary Arsenio Balisacan and Finance Secretary Frederick Go noted that they do not expect growth to recover to its peak in the early months of the year.

Still, both economic managers are confident that the economy can finally reach the revised 5 to 6 percent target for 2026, albeit progressively.

4.4%

The outlook comes after the Philippine economy saw an even more disappointing fourth-quarter growth. This registered at a 16-year low of just 3 percent—worse than the revised 3.9 percent in the third quarter.

This brought the full-year print to 4.4 percent, marking the third consecutive year that the Philippines missed its target and even fell short of the Marcos administration’s already conservative forecasts.

While UA&P economists are counting on early budget releases to boost growth, they cautioned that government spending may only normalize in the second half of 2026.

Infrastructure spending, the biggest drag on growth in 2025, is expected to remain subdued due to high interest rates limiting private construction, the economists said.

With the somber economic growth, the Bangko Sentral ng Pilipinas now has more room for another policy rate cut.