PH growth projected to stay stuck near 4%
The widening corruption scandal—already eroding business confidence and prompting a shake-up in the administration—threatens to keep economic growth stuck in the 4-percent range for the next two to three quarters, complicating President Marcos’s bid to meet his own ambitious targets.
In a note to clients, Junjie Huang, an economist at Deutsche Bank, said he expected average growth this year to settle at about 4.7 percent, as the governance crisis weighs on activity and pushes expansion below potential in the coming quarters.
He added that a mix of high base effects from the first half of 2025 and softer momentum later in the year could put growth at 5.1 percent in 2026, down from his earlier forecast of 5.7 percent.
Taken together, the projections suggested the economy may fall short of Mr. Marcos’ 5.5- to 6.5-percent goal for 2025, as well as the 6- to 7-percent annual target he has set through the end of his term in 2028.
“The corruption scandal has clearly weighed on sentiment onshore and will likely drag on the growth outlook over the coming quarters as it continues to evolve,” Huang wrote.
“Heightened risk aversion among public officials could lead to uneven disbursements in the year ahead, even as there are no indications of a budget delay for 2026 and with the President also confirming that unused infrastructure funds would be reallocated,” he added.
After data showed the economy expanding just 4 percent in the third quarter—its slowest pace in over four years—Mr. Marcos’ economic team acknowledged that reaching even the lower end of the government’s growth target for the year had become increasingly difficult.
Rate cut
The central bank acted swiftly, with the Monetary Board cutting the key interest rate by 25 basis points to 4.75 percent in October.
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said another reduction in December was “possible,” while ruling out aggressive easing that could fuel concerns the economy was careening toward a hard landing.
Already, policymakers have suggested that the official targets may need adjustment to reflect the challenging economic realities created by the antigraft crackdown, which has undermined business confidence, stalled public projects and claimed Cabinet members of the Marcos administration.
Deutsche Bank’s Huang said the uncertainty around fiscal policy and growth may prompt the BSP to ease by 25 basis points in the next two meetings consecutively. The likelihood of a deeper negative output gap also increased the probability of further rate cuts, he added.
“The BSP’s current policy settings are arguably still restrictive, as the real interest rate of ~3 percent is higher than the regional average of 1.5-2 percent,” Huang said.
“We expect inflation to remain benign in the coming months, which should keep the door open for BSP’s next cuts,” he continued.
