PH growth miss darkens ’26 outlook
The outlook for the Philippine economy this year has darkened after growth in the last quarter fell short of both government targets and market expectations, analysts said, a disappointment that may prompt the central bank to offer additional support.
In a note to clients, BMI, a unit of the Fitch Group, said it was maintaining its 2026 growth forecast at 5.2 percent but cautioned that the subdued expansion in 2025 “makes this a more pessimistic outlook.”
Risks to the projection are “tilted to the downside,” BMI said, warning that prolonged delays in infrastructure spending beyond the first half of the year could restrain the recovery.
“A key assumption underpinning our 2026 growth forecast is that government spending will pick up in the second half,” the Fitch unit said.
“Should there be continued delays to infrastructure spending, household spending and exports will not be enough to offset weaker public spending, posing downside risks to our forecast,” it added.
The assessment followed data showing that gross domestic product expanded just 3 percent in the fourth quarter of 2025—the slowest pace in more than 14 years outside the pandemic—and well below the median estimate of 4.2 percent in a poll of 14 economists by the Inquirer.
The weak outturn dragged the 2025 growth to 4.4 percent, missing the government’s 5.5-percent to 6.5-percent target and falling short of the 4.8-percent consensus forecast. Officials and analysts pointed to a mix of climate-related disruptions and the Marcos administration’s sweeping anticorruption drive, which curbed government spending and weighed on business and consumer confidence.
Consumer spending grew 3.8 percent in the fourth quarter, easing from 4.1 percent in the previous three months. Government spending also cooled, rising 3.7 percent after a 5.8 percent increase earlier in the year. Investment, measured by gross capital formation, fell 10.9 percent.
Speaking to reporters three days after the data release, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said growth may recover in the second half of the year, adding the central bank would assess whether it could do more to spur demand.
“We’re looking to revise that [2026 growth forecast],” Remolona said. “I hope we don’t revise it downwards”
Since beginning its easing cycle in August 2024, the BSP has lowered its benchmark policy rate by a total of two percentage points, bringing it to 4.5 percent.
In a separate commentary, Deutsche Bank Research said the underwhelming growth data made a rate cut in February by the BSP “almost certainly on the table.”
“We also see a rising likelihood of another rate cut in the first half given the likely wider-than-expected negative output gap,” the bank added.
