While inflation has eased and borrowing costs are set to come down, Metrobank warned that Filipino consumers remain weighed down by elevated debt levels, limiting how much spending can recover in the near term.
Debt, flood control probe may cap the rebound
“As the BSP moves policy rates to neutral in 2026 and the investment environment improves, investment activity is expected to pick up. Private consumption should also improve with anticipated increases in direct cash transfers from the government in lieu of the budget initially allocated for public construction,” Metrobank Research said.
“However, gains will likely be capped by still elevated consumer debt levels and weak sentiment stemming from ongoing government controversies,” it added.
Rebound year?
The bank sees 2026 shaping up better than last year, after a volatile 2025 marked by weak growth, peso pressure, and global uncertainty tied to US policy shifts and slower domestic activity.
“Coming from a year of surprises, we are expecting a better 2026 as both global and domestic economies recover,” Metrobank Research said in a note.
Still, the near-term outlook remains uneven.
“For the rest of this year, government spending is expected to remain subdued and consumption still subpar,” it said, pointing to delayed fiscal execution and cautious household behavior.
Rate cuts offer relief, not a quick fix
On monetary policy, Metrobank expects the US Federal Reserve to cut interest rates by a total of 100 basis points in 2026, bringing rates down to around 2.50 to 2.75 percent as growth moderates and labor market conditions soften.
Locally, the Bangko Sentral ng Pilipinas is seen delivering a cumulative 50 basis points of rate cuts, pulling the key policy rate toward about 4 percent by end-2026, which should help support investment and credit demand.
Peso pressure lingers despite easing inflation
Inflation, which dipped below the BSP’s target range in 2025, is expected to normalize, averaging around 3.3 percent in 2026 as demand recovers and base effects fade.
The peso, however, is likely to stay under pressure, as a stronger US dollar and a still-wide current account deficit offset the benefits of lower domestic rates.
—Edited by Miguel R. Camus
