Graft fallout seen to keep PH growth below 6% until 2027
The Philippine economy is unlikely to hit average growth of 6 percent or more until at least 2027, ANZ Research said, citing a slow recovery in confidence and government spending after a downturn triggered by an expanding corruption crackdown.
In a note to clients, Khoon Goh, ANZ’s head of Asia research, said growth may recover to 5 percent this year from the sluggish 4.8 percent clip it estimated for 2025, before rebounding to 5.6 percent in 2027.
The outlook suggested the economy will remain below its estimated 6 percent potential until next year, despite a gradual recovery.
But the predictions settled within the watered-down targets of the Marcos administration. The government cut its growth target to 5 to 6 percent for this year and to 5.5 to 6.5 percent for 2027, down from the earlier goal of 6 to 7 percent for 2026 through 2028.
Those revisions were triggered by a widening corruption scandal that delayed public works and eroded both business and consumer confidence. Actual growth had already slowed to a four-year low of 4 percent in the third quarter of 2025 amid the sweeping anti-graft drive.
“In the Philippines, the flood-infrastructure-related corruption scandal has been a major drag on economic activity,” Goh wrote. “The contractionary fiscal stance has not only disrupted capital formation but also weighed heavily on sentiment, with businesses reluctant to commit new funds and households deferring discretionary spending.”
“Transparency is being strengthened for all infrastructure projects, but it may take time for disbursements to normalize and for investor and public confidence to be restored,” he added.
To help “offset” the drag from the graft fallout, the Bangko Sentral ng Pilipinas (BSP) cut its benchmark rate by a quarter point to 4.5 percent at the Monetary Board’s Dec. 11 meeting. The move, widely expected by economists, brought total reductions since the easing cycle began in August 2024 to 2 percentage points.
Separately, the United Nations (UN) said in its “World Economic Situation and Prospects 2026” report released Friday that the Philippines may return to its growth potential in 2027, as low inflation and resilient consumer spending are supported by stronger policy measures.
The UN projected the Philippine economy to expand 5.7 percent in 2026 and 6.1 percent in 2027, outpacing East Asia’s projected average growth of 4.4 percent over the same period and the global economy’s estimated 2.7 percent this year and 2.9 percent next year.
Inflation is expected to settle at 2.3 percent in 2026 and 2.8 percent in 2027, the organization added, remaining within the BSP’s 2 to 4 percent target range.
“In the Philippines, low inflation, robust labor market conditions, and steady remittance inflows have buoyed consumer spending, while government spending and investment have further supported growth,” the UN said.
“Many fiscal packages aim to stimulate consumption and protect vulnerable groups in the near term while enhancing infrastructure investment to support long-term growth,” the UN added, citing cash handouts, targeted transfers and subsidies for food, transport and wages as the country’s specific measures.
Zooming out, ANZ’s Goh said Asia’s economic performance ended 2025 on a strong note, with solid export growth and accelerating economic expansion. But he warned that such a strength is unlikely to be sustained in 2026––the year of the horse.
“But we are not expecting a marked deterioration in activity,’ he said. “More of a normalizing in growth from above trend pace in some instances, akin to going from a gallop to a canter.”
Meanwhile, the UN described Asean growth as “increasingly divergent,” noting that economic performance in the region has remained steady, with 2025 growth continuing to exceed that of most other developing regions.
“However, [Asean] growth is projected to moderate in 2026 amid persistent geopolitical tensions, the impact of higher United States tariffs, and slowing growth among major trading partners,” the organization said.
“The global economic outlook remains clouded by elevated macroeconomic uncertainties, shifting trade policies, and persistent fiscal challenges,” it added. “Geopolitical tensions and financial risks add to these pressures, leaving the global economy fragile.”
