PH seen to grow by 4.6% this year
The lackluster economy in 2025 did little to unsettle the Philippine bond market, with stability expected to continue as domestic growth may pick up to 4.6 percent this year, Bank of America (BofA) said.
Vince Valdepeñas, BofA’s Philippine country head, said the bank expected gross domestic product (GDP) to remain below target in the first half of 2026 but recover to mid-4 percent. This is coming from an anemic growth of 3 percent in the fourth quarter of 2025.
Even so, Valdepeñas expressed optimism that the Philippines’ credit standing and bond market would remain firm. He cited the recent successful global bond sale under the Marcos administration, which the Finance department said had shown that investors are still confident in the country’s fiscal path.
“While our house view for 2026 GDP growth forecast is 4.6 percent, on a relative basis, the Philippines remains one of the stronger economies in the region. Hence, we think, investor appetite remains resilient, unless the gap between GDP growth rate and inflation becomes extremely narrow. That said, we expect growth to bounce back in 2027,” he said.
In January, the government raised $2.75 billion from the sale of US dollar bonds, which received investment-grade ratings from major global debt watchdogs despite political and economic uncertainties.
“To keep it that way, the priority [should be] credible budget execution and governance reforms that restore capex (capital expenditures) momentum, paired with gradual BSP (Bangko Sentral ng Pilipinas) support while inflation stays within target,” he said in an interview with the Inquirer.
“That combination is what rating agencies and investors rewarded in January,” he added.
Commenting on the BSP easing cycle, Valdepeñas said a measured 25-basis-point rate cut would be “supportive at the margin.”
“It should anchor the front end, keep term premiums contained and buttress demand for peso bonds without unsettling [foreign exchange]. For issuers, that points to incrementally lower carry (cost of holding an assets) and a constructive issuance window through the second quarter,” he said.
Local 10-year bonds have been hovering around 6 percent, which Valdepeñas said “shows that Philippine bonds stack well versus peers given real yields and an easing bias,” helping the market feed back into a potential 2026 economic rebound.
“Robust demand for sovereign paper can crowd‑in selective risk appetite for high‑grade corporates. January’s outcome is an early example of that virtuous loop,” he said.
That said, headwinds remain for the bond market, with the peso trading near 58 to 59 per dollar and volatility persisting. To manage currency risk, Valdepeñas said issuers should maintain a balance.
”The sovereign can balance FX (foreign exchange) by pairing hard‑currency prints with local issuance, leveraging deepening onshore liquidity and healthy FX reserve cover. Corporates should align foreign‑currency debt to US dollar or Japanese yen revenues where possible,” Valdepeñas noted.
But since the BSP’s easing cycle is nearing its end, Valdepeñas added that issuers should continue to take “measured, not rushed” approaches to foreign-exchange risk.
