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The Philippine economy will likely undershoot the target this year amid spending cuts and weak investor sentiment due to the graft scandal, increasing the possibility of further easing this month,  Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. said.

Speaking to reporters at the BSP head office in Manila, Mr. Remolona said gross domestic product (GDP) growth could settle between 4% and 5% by yearend, well-below the government’s 5.5-6.5% goal.

Asked if this raises the odds of a rate cut at its Dec. 11 meeting, Mr. Remolona said: “Yeah, most definitely. But it’s not assured.”   

The BSP in October reduced the benchmark interest rate by 25 basis points (bps) for a fourth time in a row, bringing borrowing costs to an over three-year low of 4.75%. It has so far delivered a total of 175 bps in cuts since it began its easing cycle in August 2024.

The Philippine economic outlook has been clouded by a corruption scandal involving anomalous government projects. This has slowed government spending, hurt investor confidence, and dampened business and consumer sentiment.

Mr. Remolona said GDP growth is expected to slump this year with a slight pickup by mid next year. A full recovery is likely by 2027, he added.

“One reason is part of the decline in 2025 is because the government also cut its spending in order to review flood control projects and other projects. But the main reason is probably the loss of confidence by investors,” Mr. Remolona said.

Earlier this week, Economy Secretary Arsenio M. Balisacan conceded that this year’s growth target is out of reach, after a weaker-than-expected third-quarter growth.

In the third quarter, the Philippine economy grew by 4%, the slowest in over four years. This brought the nine-month GDP growth average to 5%.

RRR cut

Meanwhile, Mr. Remolona said lowering banks’ reserve requirement ratio (RRR) is unlikely to spur economic growth.

“It’s already very low, so a further cut won’t do that much,” he said. “So, when you go from 5% to, say, 2%, it’s not a lot when it comes to the reserve requirement. But still, it might help.”

The BSP governor noted that although they are considering a further reduction in RRR, the timing is uncertain amid excessive liquidity in the financial system.

“I didn’t commit to the timing. At present, we still have too much liquidity in the system. A cut in the reserve requirement will add to that liquidity,” Mr. Remolona said.

In February, the BSP cut universal and commercial banks and nonbank financial institutions with quasi-banking functions’ RRR by 200 bps to 5%. Digital banks’ RRR was reduced by 150 bps to 2.5%, while thrift banks’ RRR was lowered by 100 bps to 0%. The RRR cuts took effect in the week of March 28.

On the other hand, Mr. Remolona said the peso recently gained strength amid the anticipated easing by the US Federal Reserve.

“We’ve had some recovery in the peso, partly because the Fed is expected to cut rates on December 10^th, and for other reasons,” he said.

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 set to have its last meeting this year on Dec. 10, a day before the BSP’s last policy meeting this year.

Slower growth

Meanwhile, Nomura Global Markets Research sees the economy expanding by 5.3% in 2026, a downgrade from its earlier projection of 5.6%.

“We cut our 2026 GDP growth forecast to 5.3% from 5.6%, which is a more modest pickup from 4.7% in 2025, despite low base effects,” Nomura said in its Asia Macro Outlook 2026 released on Wednesday. “We believe the ‘bad scenario’ continues to play out regarding the impact on growth of the ongoing government corruption scandal via a sharp drop in public sector spending.”

Nomura said dismal growth may prompt the central bank to deliver deeper rate cuts until next year to a terminal rate of 4%.

In its report, Nomura said the Philippines may secure a credit rating upgrade from S&P Global Ratings if it ensures timely resolution of the ongoing flood control corruption scandal.

If realized, the country’s credit rating will just be a notch lower than the National Government’s “A” level grade target.

“On credit ratings, we expect… a one-notch upgrade by S&P on the Philippines, assuming a resolution of the graft scandal is not delayed,” it said.

S&P Global Ratings last week kept its long-term “BBB+” and short-term “A-2” credit ratings as well as its “positive” outlook on the Philippines.

The credit rater noted that the economic slowdown due to the flood control fiasco will likely be temporary.

“This implies S&P is likely to wait another year and, in our view, uncertainty remains high: if a resolution to the corruption scandal is somehow reached and signs of an economic recovery emerge, a one-notch upgrade to “A-” is possible; otherwise, the risk we see is the outlook could be put back to ‘stable’ or even reduced to ‘negative,’” Nomura said.

However, Mr. Remolona noted that S&P’s recent affirmation of the country’s credit ratings could help regain market confidence and boost the economy.

“The stock market has recovered, so that kind of shows that confidence is coming back. S&P reaffirmed our positive outlook, which means we’re still on track for an upgrade in our ratings,” he said. “So, the signs suggest that the confidence is returning.” — Katherine K. Chan

The Philippine economy  is expected to miss the government’s growth targets this year until 2027, the Organisation for Economic Co-operation and Development (OECD) said.

In its latest Economic Outlook on Tuesday, the OECD has slashed its Philippine gross domestic product (GDP) growth forecast to 4.7% for this year from 5.6% in its June report.

The OECD also trimmed its GDP growth forecast to 5.1% for 2026 from 6% previously. It sees the economy growing by 5.8% in 2027.

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

“The corruption scandal has actually already weighed on economic activity in the third quarter of 2025. The channel through which it has weighed on activity is public construction, which has collapsed in the third quarter,” OECD economist Cyrille Schwellnus said at a separate briefing on Wednesday.

Philippine GDP grew by a weaker-than-expected 4% in the third quarter, bringing nine-month growth to 5%. This, as household final consumption expenditure and government spending slowed amid the corruption mess.

“This lower growth will bring down annual growth for 2025, but also annual growth for 2026,” he added.

Mr. Schwellnus noted that the growth projections assume that the corruption scandal will be resolved relatively quickly, along with more transparent public procurement. But it is uncertain how quickly public investment and investor confidence will rebound, he added.

Based on the OECD’s latest Economic Outlook, the Philippines will be the fourth fastest-growing economy in Southeast Asia this year, after Vietnam (8.2%), Malaysia (5%) and Indonesia (5%).

For 2026, the Philippines is seen to post the second-fastest growth in Southeast Asia, after Vietnam’s 6.2%. The Philippines and Vietnam are expected to post the fastest growth in the region in 2027 at 5.8%.

In a report, the OECD noted that the Philippine economy will gradually return to its growth path “but risks are tilted to the downside.”

“Private consumption is supported by a strong labor market and contained inflation, but investment has weakened as the execution of public infrastructure projects has slowed on the back of a corruption scandal linked to public works,” the OECD said.

The OECD said private spending, which accounts for more than 70% of the economy, is expected to stay robust as job gains bolster real incomes amid easing inflation.

Household final consumption expenditure is projected to expand by 4.7% this year, slowing from 4.9% in 2024. It is expected to pick up to 5.1% in 2026 and 5.9% in 2027.

“A more persistent-than-expected weakness in public investment related to tighter corruption controls and weaker investor confidence could weigh on domestic demand over 2026,” the OECD said.

Investment may stage a modest rebound in the coming quarters as borrowing costs ease and public investment restarts, it said. However, slower export momentum amid global uncertainties and softening external demand may temper gains.

“On the upside, the recent liberalization of foreign investment rules could help offset export headwinds by attracting higher capital inflows,” it said.

Mr. Schwellnus said the OECD has identified critical areas the Philippines can focus on to boost growth, such as reducing non-wage labor costs and updating employment regulations.

“(There are) barriers to competition in electricity, telecommunications, and transport. These could be further reduced, which would lower costs for businesses and consumers, while encouraging private sector investment,” he said.

Inflation

At the same time, the OECD sees headline inflation averaging 1.6% this year, with the Bangko Sentral ng Pilipinas (BSP) expected to lower its policy rate to 4.25% in 2026.

“Inflation will remain contained in the near term amid weak domestic demand but will gradually return to the midpoint of the central bank’s target range as food and energy price effects fade, the recent depreciation of the currency is transmitted to domestic prices, and growth gradually recovers,” it said.

The forecast is slightly below the BSP’s 1.7% projection for 2025 and the 10-month average.

With below-target inflation, subdued demand-side pressures and slower growth, the OECD said the central bank is expected to continue easing, with policy rates seen at 4.25% in 2026.

BSP Governor Eli M. Remolona, Jr. said on Wednesday the weaker growth outlook gives the Monetary Board room for another rate cut at its Dec. 11 policy meeting.

The central bank has reduced key borrowing costs by 175 bps since it began its easing cycle in August 2024, bringing the policy rate to a three-year low of 4.75%.

In addition, the OECD said the fiscal policy will likely be “moderately restrictive” through 2027 as the government aims to reduce the budget deficit.

The government aims to cap the deficit at P1.56 trillion this year, equivalent to 5.5% of the GDP, and further narrow the gap to P1.55 trillion or 4.3% in 2028.

“The pace of this consolidation could be stepped up in 2026 to put public debt on a firmer downward path. The overall macroeconomic policy mix is broadly appropriate given that fiscal policy turns moderately more restrictive in 2026,” the OECD said.  — Aubrey Rose A. Inosante, Reporter

The national government’s (NG) outstanding debt inched up to PHP 17.562 trillion at the end of October due to a weaker peso.

Data from the Bureau of the Treasury (BTr) showed outstanding debt rose by 0.61% to PHP 17.562 trillion in October from PHP 17.46 trillion at end-September. 

This was 1.2% higher than the PHP 17.36-trillion projected debt level by end-2025.

Year on year, NG debt jumped by 9.62% from PHP 16.02 trillion as of October 2024, the BTr said.

The end-October level was also a tad lower than the record-high PHP 17.563 trillion in outstanding debt seen as of July. 

“The expansion was driven by net issuances of domestic and external liabilities, as well as due to the upward revaluation effects of the weaker peso against the US dollar,” the BTr said.

The peso depreciated to PHP 58.771 per dollar at the end of October from PHP 58.149 at end- September, it said.

NG debt is the total amount owed by the Philippine government to creditors such as international financial institutions, development partner-countries, banks, global bondholders and other investors.

In October, the bulk or 68.6% of the debt stock came from domestic sources, while external obligations made up the rest, consistent with the government’s strategy to prioritize local currency financing to reduce foreign exchange risks and help develop the bond market.

Domestic debt went up by 0.6% month on month to PHP 12.05 trillion at end-October from PHP 11.97 trillion at end-September. This was slightly above the PHP 12.04-trillion year-end domestic debt projection.

The net issuance of government securities added PHP 70.65 billion to the outstanding debt, and the peso’s depreciation also increased the valuation of its retail dollar bonds by PHP 1.78 billion.

Year on year, this was 10.61% higher than the PHP 10.89 trillion recorded as of October 2024.

Meanwhile, external liabilities rose by 0.63% to PHP 5.52 trillion at end-October from PHP 5.48 trillion at end-September. This exceeded the PHP 5.32-trillion end-2025 external debt projection by 3.8%.

The month-on-month increase came “behind the net availment of loans of PHP 8.25 billion and upward net adjustments in the peso equivalent of foreign currency debt of PHP 26.1 billion,” the BTr said.

“Peso depreciation against the US dollar added PHP 58.64 billion to the debt total, while peso appreciation against third currencies provided an offset of PHP 32.54 billion.”

The outstanding foreign debt was composed of PHP 2.82 trillion in global bond issuances and PHP 2.7 trillion in loans. External debt securities were made up of PHP 2.39 trillion in US dollar bonds, PHP 257.61 billion in euro bonds, PHP 58.77 billion in Islamic certificates, PHP 57.83 billion in Japanese yen bonds, and PHP 54.77 billion in peso global bonds.

Year on year, foreign debt climbed by 7.53% from PHP 5.13 trillion.

NG-guaranteed liabilities dipped by 0.64% month on month to PHP 344.41 billion at end-October due to net repayments of PHP 1.25 billion and lower valuation of foreign currency guarantees of PHP 0.97 billion.

“The Bureau reaffirmed its commitment to prudent debt and risk management, ensuring that borrowings remain aligned with the government’s long-term fiscal sustainability goals and supportive of a thriving and stable macroeconomic environment toward a prosperous and more inclusive future for Filipinos,” the Treasury said.

NG debt as a share of gross domestic product (GDP) went up to 63.1% at end-September from 60.1% in the same period last year. This is above the 60% threshold deemed sustainable for developing countries.

The Department of Finance expects the NG debt-to-GDP ratio to ease to 61.3% by end-2025 and eventually fall to 58% by 2030. — with inputs from A.R.A.Inosante

Industry groups on Tuesday pushed back against a proposal to impose an excise tax on single-use plastics, saying the suggested levy is unfair, could make goods expensive and lead to job losses.

“The proposed tax is discriminatory,” Benjamin So Chua, president of the Philippine Plastics Industry Association, told lawmakers at a House of Representatives hearing. “And it is regressive, increasing consumer costs disproportionately on low-income households.”

There are nine pending House bills proposing an excise tax on single‑use plastics, with the tax rate ranging from PHP 100 to PHP 150 per kilogram of plastic bags. The excise tax would then be increased by 4% every year to discourage the use of single-use plastics.

“The market price of our plastic products is PHP 90 per kilo… if you add another PHP 100 per kilo, that will more than double the price. When we add PHP 150, it will become around three times the cost,” Mr. Chua said.

“This will definitely result in demand destruction and loss of employment to our industry,” he added.

The Philippines has one of the cheapest tax rates for single-use plastics compared to other countries at PHP 0.40 per bag, the Department of Finance (DoF) said last year.

However, the Philippines is considered one of the biggest sources of plastic waste in the world. World Bank data showed the Southeast Asian nation as the third-largest contributor of mismanaged plastic in the ocean annually.

The proposed plastic tax is part of the Marcos administration’s legislative wishlist for the 20^th Congress. A similar measure was approved on final reading by the House in 2022, but a counterpart bill at the Senate failed to be approved.

Finance Undersecretary Karlo Fermin S. Adriano said the proposal is primarily not a tax bill but an environmental measure, aimed at curbing the widespread use of plastic bags in one of the world’s most plastic‑reliant and heavily polluted countries.

Plastic pollution costs the government about PHP 70 billion per year, he added. “What we’re going to collect, if we follow a PHP 100-per-kilogram excise tax, is only around PHP 8 billion.”

“The revenue we’re going to collect from the excise tax is significantly smaller than the current economic cost of plastic pollution,” Mr. Adriano told lawmakers at the same briefing.

But there is no alternative to plastics as a major packaging material that is both cheaper and more reliable,” Joseph R. Fabul, director of the Philippine Chamber of Food Manufacturers, said.

“There is no commercially viable large-scale alternative that matches the safety barrier and logistics functions at comparable costs,” Mr. Fabul told the same hearing.

Mr. Adriano said the plastic tax measure’s intent is for producers to pass the levy onto consumers to curb the use of plastics.

“It will be burdensome, particularly for the poor,” said Mr. Adriano. “But we would also like to note that this income decile is the most vulnerable to climate change and its impact. When there are floods, they are the ones who cannot recover.”

The Philippines is among the world’s most disaster-prone countries, with storms and monsoon rains routinely inundating towns and cities. The Southeast Asian nation was hit by 22 storms this year, with a series of strong typhoons in late October leaving hundreds dead and causing billions of pesos in damage.

“That’s why we are imposing this excise tax, so that consumers in general will internalize the cost of all these environmental effects and impacts,” Mr. Adriano said.

The DoF is looking to expand the type of plastics covered under the proposed measure, he added. “Previously, the proposal only covered plastics, specifically sando bags and labo bags.”

“We’re just finalizing the details, like the design, which includes, among others, the tax rate and the coverage,” he said.

The House Ways and Means Committee has formed a technical group to refine the bill’s provisions, particularly the tax rate and plastic type coverage, panel chairman and Marikina Rep. Romero S. Quimbo said.

Analysts said the proposal could stoke inflation in the short term, as many basic commodities rely on plastic for packaging.

However, John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said prices of items that use plastic packaging will likely go up due to the excise tax.

“The tax would raise the cost of plastic-packaged goods, and firms may pass on part of that cost to consumers especially for items like bottled drinks, sachet products and convenience foods,” he said in a Viber message. “However, the overall impact on inflation may be small, since the tax targets only a narrow segment of goods and consumers can shift to cheaper, reusable, or non-plastic alternatives.”

“In the long term we may expect a shift towards sustainable packaging, especially if competition calls for it,” Reinielle Matt M. Erece, an economist at Oikonomia Advisory & Research, Inc., said in a Viber message. “This shift is good both for the environment as well as economically.” — Kenneth Christiane L. Basilio, Reporter