Maybank sees Philippine economy growing below target until 2027

PHILIPPINE ECONOMIC growth may continue to undershoot the government’s targets until next year as the lingering effects of the flood control corruption scandal will likely derail recovery, Maybank Investment Banking Group said.

Maybank economist Azril Rosli said the country’s gross domestic product (GDP) may have grown by 4.8% in 2025, before picking up slightly to 4.9% in 2026. This was down from their earlier estimates of 5.6% and 5.8%, respectively.

If realized, these will fall short of the government’s targets of 5.5%-6.5% for 2025 and 5%-6% for 2026.

“So, we did some quantification on the… impact of the flood control (issue on the Philippine economy). Based on the quantification, we actually revised our GDP growth for the Philippines to 4.8% in 2025 and to 4.9% in 2026,” Mr. Rosli told a media briefing on Tuesday.

“I think… currently the important significant features that we are looking at (are) driven by the flood control spending cuts, as well as the broader Department of Public Works and Highways (DPWH) budget consolidation,” he added. “We thought that the quantification is expected to derail the government’s medium-term economic targets.”

Last year, investigations into anomalous flood control projects across the country uncovered widescale corruption involving lawmakers, DPWH officials and private contractors.

The controversy weakened consumer and investor sentiment as well as slowed government spending and household consumption, driving GDP growth to an over four-year low of 4% in the third quarter. As of end-September, GDP growth stood at 5%.

However, Maybank analysts said the lower end of this year’s target is still attainable if private consumption, which accounts for about 43% of GDP, will pick up.

“(At) the end of the day, it’s really the consumer segment that’s the biggest driver for the Philippines. So, as long as your underlying demand remains quite robust… then the 5%, to a certain extent, is achievable,” Kervin Sisayan, head of equity research at Maybank Securities Philippines, said.

Mr. Rosli likewise said that the government’s renewed push for reforms and catch-up plans, if materialized, could provide some boost for domestic demand and investment climate in the near term.

“We’ll see clearer policy direction, improved regulatory certainty, and stronger public-private engagement that can help unlock delayed private investment and accelerate project implementation,” he said.

“So, this could definitely help in terms of, especially on infrastructure, energy as well as strategic industries. And, this could also provide (a) meaningful boost to domestic demand in the second half of the year.”

For 2027, Maybank expects the economy to expand by 5.2%, also below the 5.5%-6.5% aimed by the government.

If Maybank’s projections until 2027 hold true, the Philippines would miss its growth targets for a fifth straight year.

INFLATION TO PICK UP
Meanwhile, Maybank said Philippine inflation is expected to accelerate this year due to base effects, stabile utility costs and a weak peso in the first half.

The bank sees the consumer price index picking up to 2.2% this year from 1.7% in 2025. If realized, inflation will be back to the Bangko Sentral ng Pilipinas’ (BSP) 2%-4% target.

“Looking ahead, inflation is suspected to gradually pick up to around 2.2% in 2026, moving closer to the BSP’s target range as base effects fade and utility-related costs stabilize,” Mr. Rosli said.

He also noted that geopolitical tensions and exchange rate volatility pose risks to transport inflation, which could bring price pressures this year.

On Jan. 15, the peso slumped to a fresh low of P59.46 against the dollar, surpassing the previous record of P59.44 versus the greenback on Jan. 14.

Amid this macro backdrop, Maybank sees room for deeper cuts this year to bring the benchmark policy rate to 4%.

Mr. Rosli said the central bank will likely deliver one 25-basis-point (bp) cut in each half of the year.

“We’re maintaining vigilance on emerging risks from the external trade outlook, as well as geopolitical tensions and tariff-related uncertainties,” he said.

“So, the policy stance balances providing monetary accommodation to support economic activity while preserving credibility on inflation control, as well as maintaining adequate policy space for future shocks.”

The Monetary Board has so far lowered key borrowing costs by 200 bps since August 2024, bringing it to an over three-year low of 4.5%.

BSP Governor Eli M. Remolona, Jr. has said that they could consider easing further but noted that it may be unlikely given current economic data and as the policy rate is already close to where they want it to be.

Still, he left the door open for two 25-bp cuts this year if economic growth turns out weaker than they anticipated.

The Monetary Board is set to have its first policy review this year on Feb. 19. — Katherine K. Chan