Insider Spotlight
BMI slashed its 2026 economic growth forecast to 2.6 percent from 3 percent and lowered its 2027 projection to 4 percent from 4.5 percent, warning that a meaningful recovery may take longer than previously expected.
The downgrade followed a disappointing third quarter, when the Philippine economy grew just 2.1 percent, its slowest pace since early 2021 and below BMI's 2.9-percent estimate and the 3.1-percent consensus among economists surveyed by Bloomberg.
Growth averaged just 2.5 percent in the first nine months, leaving the economy on course to miss the government's already reduced 2026 target of 3.5 percent to 4.5 percent.
Inflation squeezes households
BMI expects consumer spending, a major engine of the Philippine economy, to remain weak as rising prices eat into household budgets and borrowing costs discourage purchases and investments.
Inflation climbed to 7.8 percent in October, a near four-year high, and BMI expects price pressures to remain elevated for much of 2027, further limiting the purchasing power of Filipino families.
The agricultural slump threatens to make matters worse, with farm output contracting 4.8 percent in the third quarter, its weakest performance this millennium, following typhoon disruptions and the effects of El Niño.
BMI warned that continued crop damage could hurt rural incomes and household spending, spreading the economic impact beyond farmers and into other businesses.
Infrastructure recovery faces delays
Government infrastructure spending remains another major obstacle, with public construction shrinking 15.1 percent in the third quarter after plunging 33.4 percent in the preceding three months.
The slowdown comes as investigations into the flood control corruption scandal continue to disrupt public projects, raising concerns that delayed government spending could prolong the economic slump.
BMI expects infrastructure spending to recover as the government resumes construction and releases funds, but cautioned that a stronger rebound is unlikely before 2027.
Even that recovery remains uncertain, with the firm warning that ongoing corruption investigations could extend project delays into next year and weaken the expected improvement.
One potential bright spot is exports, particularly electronics and technology products benefiting from global artificial intelligence demand, which BMI expects to remain supportive through 2027.
But with inflation squeezing consumers, agriculture under pressure and public investment struggling to recover, BMI's latest downgrade points to another difficult year for the Philippine economy before growth begins to regain momentum.
—Edited by Miguel R. Camus
