PHILIPPINE ECONOMIC GROWTH may continue to undermine the governmenttarget until 2027 during the daygo awayfor the corruption of flood control, Capital Economics said.
In a report on Monday, the think tank said it projects gross domestic product (GDP) growth to reach 4% this year, well below the government’s target of 5.5-6.5%.
Capital Economics sees Philippine GDP rising steadily to 4.5% in 2026 and 5% in 2027. However, these are still below the national target of 6-7%.
“The corruption that has plagued the Philippines will continue to grow in the coming quarters and may result in a rate cut for the BSP,” Capital Economics Senior Asia Economist Gareth Leather said in a report on Monday.
Meanwhile, ANZ Research sees the Philippine economy growing by 4.8% this year as the National Government continues to tighten the belt amid ongoing investigations into public infrastructure projects.
In its Q1 2026 ANZ Research Quarterly, it cut its GDP growth estimates for the Philippines to 4.8% in 2025 from 4.9% previously.
“For Malaysia and the Philippines, the momentum implied by 2026 is negative,” said ANZ Research Chief Economist for Southeast Asia and India Sanjay Mathur. “In fact, our concern for the Philippines is that the implementation of the budget may not be possible as issues related to governance lead to greater scrutiny.”
In the third quarter, the country’s economic growth slowed to 4%, the slowest increase seen in four years or since the pandemic of the coronavirus disease 2019 (COVID-19).
In the nine-month period, GDP growth reached 5%, below the government’s target of 5.5-6.5%.
A massive dispute involving Public Works officials, legislators and private contractors over multibillion-peso corruption in flood control projects has dramatically dragged down government spending and household spending.
Government spending fell for the third consecutive month in October to P430.6 billion, down 7.76% from the P466.8-billion expenditure recorded last year.
However, ANZ kept its growth forecasts for 2026 and 2027 at 5% and 5.6%, respectively.
Meanwhile, the think tank lowered its inflation forecast for 2025 to 1.6% from 1.8%.
Next year, it sees inflation accelerating back to the central bank’s target of 2-4% at 2.4%, slower than the previous forecast of 3%. It also reduced its 2027 rate to 3% from 3.2%.
Capital Economics also predicts that inflation will slow to 1.6% by the end of the year, before rising to 2.3% next year and 3% in 2027.
Positive inflation supports the case for expansionary monetary policy.
“There is also a lot of support for monetary policy,” said Mr. Leather. “Since inflation will remain low, we think the central bank will lower interest rates a few times.”
The Monetary Board last week cut the key policy rate by 25 basis points (bps) for the fifth consecutive meeting to 4.5%. This brought its decline to 200 bps since its inception its reduction cycle in August 2024.
Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. he said they may end the current tapering cycle with a final 25-bp cut next year depending on economic data.
ANZ Research expects the BSP to deliver a final 25-bp rate cut next year, while Capital Economics sees a final rate of 4% when the first cut is likely to come in the first quarter.
The Monetary Board is scheduled to hold its first meeting next year in February. – Katherine K. Chan
