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The Asian Development Bank (ADB) slashed its growth forecasts for the Philippines for this year and 2026 but it is still expected to be the second-fastest growing economy in Southeast Asia.

In its December Asian Development Outlook (ADO), the multilateral lender slashed its Philippine gross domestic product (GDP) growth forecast to 5% from 5.6% in September.

For 2026, the ADB trimmed its Philippine growth forecast to 5.3% from 5.7% previously.

These latest projections are below the government’s 5.5-6.5% target for this year, and the 6-7% growth goal for 2026 to 2028.

In its report released on Wednesday, the ADB said the lower growth prospects for the Philippines were “due to weak infrastructure spending amid investigations of publicly funded projects, and natural hazards.”

Data from the Department of Budget and Management showed that expenditure on infrastructure and other capital outlays for the January-to-September period declined by 10.7% to P877.1 billion from P982.4 billion a year ago.

Sluggish infrastructure spending, affected by adverse weather and stricter fund releases to the Department of Public Works and Highways, dragged Philippine GDP growth to a weaker‑than‑expected 4% in the third quarter. This brought the nine‑month average growth to 5%.

“Low inflation and ongoing monetary easing should sustain domestic demand, supporting stronger growth in 2026,” the ADB said.

The Bangko Sentral ng Pilipinas has so far reduced borrowing costs by a cumulative 175 basis points (bps) since it began its easing cycle in August last year, bringing the key rate to 4.75%.

“However, uncertainties arising out of investigations of publicly funded infrastructure projects and weather-related disruptions pose downside risks,” it added.

A corruption scandal involving anomalous flood control projects has already triggered protests, slowed economic activity, and shaken investor confidence in the country.

An independent commission is now investigating the allegations that government officials, lawmakers and contractors received billions of pesos in kickbacks from anomalous projects.

STILL SECOND FASTEST

Based on the latest ADO, the Philippines is still projected to be the second fastest-growing economy in Southeast Asia this year, just behind Vietnam (7.4%) and tied with Indonesia (5%). It is ahead of Malaysia (4.5%), Singapore (4.1), and Thailand (2%).

For 2026, the Philippines is still seen to post the second-fastest growth in Southeast Asia, after Vietnam’s 6.4%.

The ADB expects Philippine growth to stay above the Southeast Asian average through 2026.

For the region, the bank raised its regional GDP growth outlook to 4.5% this year from 4.3% in its September update. It also hiked its projections to 4.5% in 2026 from 4.4% previously.

This reflects stronger‑than‑expected third‑quarter results in Indonesia, Malaysia, Singapore, and Vietnam, alongside better external environment and supportive government expenditures, the ADB said.

“Several risks to the subregion’s (Southeast Asia) prospects remain, notably from global uncertainty, climate-related disruptions, and domestic political developments,” the ADB said.

Despite these risks, the lender said the Southeast Asian region remains resilient, with prospects depending on sustained policy support and flexible economic strategies.

However, the ADB’s Philippine growth forecast was slightly below the projected 5.1% growth of developing Asia for this year but exceeded the 4.6% growth forecast in 2026.

Developing Asia includes 46 Asia-Pacific countries, but excludes Japan, Australia, and New Zealand.

Meanwhile, the ADB expects Philippine headline inflation to average 1.8% this year and 3% in 2026, unchanged from its September forecast.

This is slightly higher than the Bangko Sentral ng Pilipinas’ (BSP) 1.7% average forecast for this year, but lower than the 3.3% average forecast for 2026.

Headline inflation averaged 1.6% in the first 11 months of 2025, according to the Philippine Statistics Authority.

Meanwhile, the Mastercard Economics Institute (MEI) gave a 5.6% growth forecast for the Philippines in 2026, which will make it the fastest-growing economy among the Association of Southeast Asian Nations-5 (ASEAN-5).

This is ahead of Indonesia (5%), Malaysia (4.2%), Singapore (2.2%), and Thailand (1.8%).

“In 2026, the growth trajectories of the ASEAN-5 nations are expected to diverge. GDP is projected to expand steadily in Indonesia and the Philippines, while Malaysia, Singapore, and Thailand may grow more slowly,” MEI said in its December Economic Outlook 2026.

MEI also expects Philippine inflation to settle at 2.8% next year.

“Because that is within the target range, further monetary policy easing may be possible; interest rates are expected to fall to 4.5% by the end of 2026,” it said.

MEI said strong borrowing momentum may fuel private consumption, while lower policy rates may help sustain this trend.

The report noted travel is a key economic driver, with domestic demand climbing in Malaysia and Indonesia and outbound spending rising in Singapore, Malaysia, Indonesia, and the Philippines.

MEI said Indonesia and the Philippines posted the fastest growth gains, with overseas travel spending jumping by 40% and 28%, respectively, over the period, MEI said. — Aubrey Rose A. Inosante

The number of jobless Filipinos rose by about 570,000 to 2.54 million in October from a year earlier, even as overall employment increased by 460,000, the Philippine Statistics Authority (PSA) reported on Wednesday, underscoring persistent vulnerabilities in the labor market despite headline job gains.

This brought the jobless rate to 5% from 3.8% in the previous month and 3.9% a year ago. It was also the highest in three months or since the post-pandemic high of 5.3% in July.

The unemployment rate averaged 4.13% in the first 10 months from 4% in the same period a year ago.

PSA Undersecretary and National Statistician Claire Dennis S. Mapa attributed the rise in joblessness to recent typhoons and the increase in labor force participation.

The labor force participation rate (LFPR) rose to 63.6% in October from 63.3% a year earlier but fell from 64.5% in September, the statistics agency said in a statement. The estimated LFPR in October translates to 51.16 million Filipinos versus 50.12 million in the same month last year.

However, Mr. Mapa cited “good signs” such as rising employment in the agriculture sector, which added 168,000 jobs from a year ago.

“We saw an increase of 1.87 million in agriculture and forestry jobs quarter on quarter, with the biggest contributor being the growing of paddy rice, as the peak season for rice farming falls in the fourth quarter,” Mr. Mapa said during a briefing.

The PSA’s latest labor force survey showed that while many found work, a significant segment remains jobless — meaning economic improvements may not be reaching all sectors.

Still, the increase in employed people — particularly those aged 15 and over — reflects underlying demand in industries like retail, construction and services. Such gains offer hope that economic activity is picking up ahead of the holiday season.

In October, services accounted for the biggest share of total employment at 60.6%, followed by agriculture with 21.5% and industry at 17.9%.

Underemployment, which covers workers seeking more hours or better-paying jobs, eased to 12% in October from 12.6% a year earlier, but inched up from 11.1% in September. The number of unemployed Filipinos stood at 2.54 million in October, higher than 1.97 million in the same month last year.

“October’s labor market reflects continued progress in improving the quality of work available to Filipinos,” Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan said in a statement.

In a note, Chinabank Research said the unemployment rate climbed in October, as not all new entrants in the labor market found jobs.

“On a positive note, there were gains recorded across industries, including challenged sectors like agriculture and manufacturing,” Chinabank said. “Looking ahead, job creation could pick up during the holiday season.”

PSA data show annual employment gains were spread across several sectors in October, including public administration (+257,000), accommodation and food services (+180,000), agriculture (+168,000), and manufacturing (+152,000).

“However, we note that the sector remains vulnerable to weather-related risks. Meanwhile, despite an uncertain global trade environment, manufacturing jobs increased (+152,000) with local factories expressing improved sentiment in the year-ahead outlook,” Chinabank said.

On the other hand, annual job losses were concentrated in services (-520,000), with notable declines in repair services, household services, and funeral-related activities.

Wholesale and retail trade also saw an annual drop (-66,000) in jobs in October.

Chinabank said this “could indicate that the softness in household consumption growth seen in the third quarter could persist this quarter.”

“Nevertheless, increased seasonal demand during the holidays could support job opportunities in the sector,” it added.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the latest numbers signal that the economy is struggling to create enough jobs.

“Yes, there are red flags. Job creation is slowing, underemployment remains high, and the sectors that usually absorb workers (retail, construction, services) are expanding weakly,” he told BusinessWorld over Viber.

“The worsening unemployment despite higher labor force participation shows that the labor market is widening, but not deepening, meaning more people are willing to work, but the economy is not generating enough stable, quality jobs to match that demand,” he added.

However, IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa cautioned that these “good signs” in agricultural jobs may be overstated.

Looking at the sector historically, agricultural employment has actually fallen from an annual average of 10.8 million in 2022 to around 10 million in the first 10 months of 2025, he said.

“The only ‘good signs’ we should be looking for are steady and rapid increases in the National Government budget for farmers and fisherfolk in terms of production subsidies, extension services, and rural infrastructure,” Mr. Af-rica told BusinessWorld via Viber. — EMPS

The World Bank (WB) sees a gradual recovery for the Philippines in 2026 and 2027, after growth slowed this year due to weaker investment and sluggish consumption, compounded by a corruption scandal and a string of natural disasters.

In its latest Philippines Economic Update released on Tuesday, the multilateral lender trimmed its Philippine gross domestic product (GDP) growth forecast to 5.1% for this year from 5.3% in its June report.

For 2026, it lowered its Philippine GDP growth forecast to 5.3% from 5.4% previously.

The World Bank also cut its Philippine GDP growth projection for 2027 to 5.4% from 5.5% previously.

These latest projections are below the government’s 5.5-6.5% growth goal for this year and the 6-7% target for 2026 to 2028.

“To borrow from Torsten Slok, chief economist at Apollo (Management), it’s a Nike swoosh pattern. He describes the US economy, and I’m describing our forecast for the Philippines as a kind of Nike swoosh. We have a dip in 2025, and then we have a gradual recovery in 2026 to 2027,” World Bank Senior Economist Jaffar Al-Rikabi said during a briefing.

He noted the average growth of the Philippines over 2025 to 2027 will be lower than 2024 when GDP expanded by 5.7%.

“For 2025… the growth is largely weighed down by domestic factors. In particular, lower construction activity and weaker consumption growth,” he said.

The Philippine economy expanded by a weaker-than-expected 4% in the third quarter, bringing nine-month growth to 5%, as the pace of household final consumption expenditure and government spending slowed amid a corruption scandal.

Mr. Al-Rikabi also noted the deceleration in fixed investment and private consumption due to higher-than-expected number of natural disasters that hit the Philippines this year.

“But for 2026 to 2027, we think that it’s likely that external factors will weigh more heavily on growth, largely slower export demand,” Mr. Al-Rikabi said.

The US imposed a 19% tariff on most goods from the Philippines starting August, dampening export demand.

The World Bank said the Philippine economy’s growth will pick up in 2026 and 2027, fueled by strong domestic demand.

“Private consumption is projected to strengthen as inflation stays low, employment remains robust, and monetary easing lowers interest rates, making it easier for businesses and households to borrow,” it said in the report.

According to the World Bank, private consumption, which accounts for more than 70% of the economy, is projected to expand by 4.8% this year, slowing from 4.9% in 2024. This is expected to pick up to 5.3% in 2026 and 5.4% in 2027.

The World Bank said investment is likely to recover as public infrastructure projects regain momentum, while recent liberalization reforms in telecommunications, transport, logistics and renewable energy improve the business climate.

The multilateral lender also expects headline inflation to average 1.8% this year, describing the pace as “very moderate” and a key source of resilience. This forecast is slightly above the Bangko Sentral ng Pilipinas’ (BSP) 1.7% projection for 2025 and the 1.6% average recorded in the first 11 months.

‘Corruption is unaceptable’

Even as the Philippine economy will see a gradual recovery in the next two years, Mr. Al-Rikabi noted risks are tilted to the downside, with “more prominent” domestic drivers.

“There is a continued challenge of heightened perceptions around governance risks. This could, if it continues, erode investor confidence. It could delay public investment execution, and it could weaken growth,” he said.

The World Bank economist also noted there may be delays in fiscal and structural reforms amid the current domestic environment, “which could slow consolidation and weigh on growth over the medium term.”

A corruption scandal involving anomalous flood control projects has already triggered protests, slowed economic activity, and shaken investor confidence in the country.

“From the World Bank perspective, corruption is unacceptable,” World Bank Country Director for the Philippines, Malaysia, and Brunei Zafer Mustafaoğlu said during the same briefing.

“The World Bank considers it detrimental to any country and has been fighting against corruption in all the member countries that we operate in,” he added.

Mr. Mustafaoğlu said the Philippine government could take this opportunity to increase transparency and modernize its budget execution system “that could actually support longer-term growth and can increase investment confidence (and) can increase long-term potential growth,” he said.

Mr. Al-Rikabi said it is important that the Philippine government double down on governance and institutional reforms. The government should also continue fiscal reforms to ensure “fiscal consolidation continues on a credible path that doesn’t compromise long-term growth.”

Also Mr. Al-Rikabi said adverse climate events remain a source for risk for the Philippines, as it could disrupt food supply and drive prices higher.

On external risks, the World Bank cited policy uncertainty, which could weaken investment trading confidence, disruptive financial market corrections, and weaker growth in key partner countries.

He also noted that as investments in artificial intelligence  normalize, major economies could face sharper deceleration, which would weigh on Philippine exports and industry.

Mr. Al-Rikabi said the government should ensure structural reforms, which opened up some sectors to more foreign investments, are implemented effectively.

Upper middle-income status

Meanwhile, Mr. Al-Rikabi said the Philippine gross national income (GNI) per capita has managed to reach the upper middle-income country (UMIC) status threshold in 2025.

“Our 2025 projection already implies that the Philippines will reach in terms of GNI per capita the threshold for UMIC this year,” he said.

According to the World Bank’s last country income classification, the Philippines is still a lower middle-income country with a GNI per capita of USD 4,470 in 2024. It was only USD 26 shy of the World Bank’s adjusted GNI per capita requirement of USD 4,496 to USD 13,935 for UMIC status.

However, Mr. Al-Rikabi said that the World Bank has to see three years of GNI per capita above the threshold to formally reclassify a country as UMIC.

“That implies as long as the economy continues to grow in 2026-2027, the country would be reclassified as UMIC in 2028,” he said.

The Washington-based lender will release its new country status thresholds in July 2026. — A.R.A. Inosante

The Bangko Sentral ng Pilipinas (BSP) is widely expected to ease for a fifth straight meeting on Thursday as economic growth slows and inflation remains below target, analysts said.

A BusinessWorld poll conducted last week showed that 17 out of 18 analysts surveyed expect the Monetary Board to cut the target reverse repurchase rate by 25 basis points (bps) on Dec. 11. This is the board’s last policy review meeting of the year.

If realized, the benchmark rate will fall to 4.5% from the current 4.75%. At 4.5%, this would be the lowest policy rate in over three years or since the 4.25% in September 2022.

In the BusinessWorld poll, only one analyst, Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco, sees the BSP delivering a 50-bp cut.

The central bank has so far reduced borrowing costs by a cumulative 175 bps since it began its easing cycle in August last year. It delivered a 25-bp cut at each of its meetings in April, June, August and October.

Moody’s Analytics Assistant Director and Economist Sarah Tan said the dismal third-quarter growth and easing inflation print may prompt a 25-bp rate cut on Thursday.

“Weaker-than-expected third-quarter GDP (gross domestic product) growth and a low-inflation environment together strengthen the case for further easing, even as risks of stronger price pressures linger,” she said in an e-mail. “These forces should outweigh concerns about the peso’s recent depreciation.”

In the July-to-September period, the Philippine GDP expanded by 4%, its slowest pace since the first quarter of 2021, as consumer and investor sentiment waned amid the ongoing public infrastructure corruption mess.

The country’s economic growth averaged 5% in the nine-month period, below the government’s 5.5-6.5% target for 2025.

Cid L. Terosa, a senior economist at the University of Asia and the Pacific, said the BSP will likely deliver a 25-bp cut in light of slowing economic growth both here and abroad, as well as a weaker pace of household spending.

“(The Philippine economy) does not seem to show signs of recovering from the effect of corruption scandals all throughout the country,” Mr. Terosa said.

For Mr. Chanco, the weaker-than-expected GDP growth in the third quarter, coupled with benign inflation, could support a jumbo cut by the central bank.

“A rate cut (on Dec. 11) is almost a given, the question is by how much, and we suspect that the very weak Q3 GDP print is reason enough for the Monetary Board to go with a larger 50-bp cut, especially with inflation still well under control,” Mr. Chanco said in an e-mail.

In November, headline inflation eased to 1.5% from 1.7% in October and 2.5% a year earlier amid slower price increases in food and non-alcoholic beverages, with food inflation posting a 0.3% decline during the month.

This brought the 11-month inflation average to 1.6%, below the BSP’s 1.7% full-year projection. November marked the ninth month in a row that inflation undershot the BSP’s 2-4% target.

Chinabank Research, which also anticipates a rate cut, said below-target inflation and well-anchored inflation expectations give the BSP room to continue easing.

“A more accommodative policy could also offer support for the Philippine economy, which grew weaker than expected in the third quarter and continues to face challenges from both the domestic and external fronts,” Chinabank Research said.

Deutsche Bank economist for the Philippines Junjie Huang said the central bank may ease further as they see slow growth through yearend.

“Q4 GDP growth may still be fairly weak amid lingering effects of constrained public spending… To reflect such a challenge, we revised down our GDP growth forecast to 4.1% year on year in Q4 from 5.4%, which in turn points to a wider negative output gap and thereby eliciting a policy action by BSP,” he said in a note.

Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said lower borrowing costs may spur spending, capital expenditures and overall economic activity.

BSP Governor Eli M. Remolona, Jr. earlier said that the Philippine GDP might grow by only 4-5% by yearend, well-below the government’s 5.5-6.5% target.

Meanwhile, Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said that the anticipated rate cut by the US Federal Reserve at its last policy meeting this year also allows the BSP to have a more accommodative monetary policy stance.

“Global easing trends, particularly the Fed’s expected cut, also provide room for BSP to act without putting undue pressure on the peso,” he said in an e-mail.

The Fed has so far lowered its key policy rate by 150 bps since September 2024, bringing it to the 3.75-4% range. It is scheduled to have its last meeting this year on Dec. 9 and 10.

“A rate cut from both the Fed and the BSP (this) week would keep the interest rate differential at 75 bps, which could then help stave off any additional depreciation pressure on the peso,” Chinabank Research said.

The peso hit the PHP 59-per-dollar level several times in November, even reaching a fresh low of PHP 59.17 versus the greenback on Nov. 12.

Further easing in 2026

Meanwhile, analysts see further monetary policy easing next year amid a dim growth outlook.

“(I’m) expecting one more 25-basis-point rate cut next year that can take place in the first quarter as GDP is likely to show sluggishness in the fourth quarter of this year with inflation to end this year at sub-two percent,” Security Bank Chief Economist Angelo B. Taningco said in an e-mail.

The BSP chief has said that the economy would only fully recover by 2027 but noted that a slight rebound might come by the middle of next year.

Maybank Investment Bank economist Azril Rosli projects two more 25-bp cuts next year, with the first one likely to come in the first half, as he expects inflation to settle at 2.2% in 2026.

“Price pressures continue to ease, with rice prices softening due to stronger domestic harvests and lower global prices, though the BSP will continue monitoring the impact of rice import restrictions on supply and retail markets,” he said in an e-mail. “Upside risk is the combined effects of rice policy adjustments, base effects, and higher electricity rates.”

The suspension of regular and well-milled rice imports will be temporarily lifted in January but will be reimposed from February to April.

The flexible tariff scheme on rice will likewise take effect on Jan. 1, wherein the levy on the staple grain will be adjusted by 5 percentage points every 5% change in global prices up to a maximum of 35%. The National Government currently imposes a 15% tariff on rice.

Meanwhile, Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. also expects the central bank’s easing cycle to end once the benchmark interest rate settles at 4% but flagged risks of excessive easing.

“A gradual easing path could bring the policy rate down to 4% in 2026, providing support to an economy that will likely depend more on monetary policy in the near term given the constraints on fiscal spending,” he said in a note.

“Nevertheless, excessive rate cuts may carry risks as inflation could rise again in 2026. An overly aggressive easing cycle could force the BSP into an abrupt reversal should inflation pick up unexpectedly, potentially leading to sharper-than-ideal rate hikes later on,” he added.

The BSP projects inflation to return to the target range by 2026 at 3.1%, before slowing anew to 2.8% in 2027. — Katherine K. Chan