PHILIPPINE ECONOMIC growth may likely be even slower this year, amid uncertainty over a “meaningful” recovery, the University of Asia and the Pacific (UA&P) said.
In its February The Market Call, UA&P cut its full-year gross domestic product (GDP) growth forecast to 4.2% from the “above 5%” forecast previously.
If realized, this will be even slower than the post-pandemic low of 4.4% GDP growth in 2025 when the flood control scandal dampened government spending and investments.
However, UA&P expects first-quarter GDP growth to pick up to 3.3% from 3% in the fourth quarter of 2025. If realized, it will be slower than 5.4% in the first quarter of 2025.
“More indicators revealed the impact of the flood control scandal, hurting economic growth in 2025 as sentiment points to a ‘muddling through’ scenario for 2026,” it said.
UA&P said the government needs to ramp up spending to drive faster growth this year.
“While uncertainty over a meaningful economic recovery remains, we see some bits of light emerging,” it said.
“With inflation remaining in the lowest quarter of BSP (Bangko Sentral ng Pilipinas) target range, policy and interest rates declining, and the peso depreciating, consumer spending, residential property sales, car sales, equipment leasing and other interest-sensitive spending should provide better consumption expenditures in Q1,” it added.
Headline inflation picked up to 2% in January from 1.8% in December and 2.9% in the same month last year.
“A more optimistic PMI in January, along with expected increases in exports and remittances from overseas Filipinos, should be supported by the peso’s depreciation,” UA&P said.
The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to a nine-month high of 52.9 in January due to fresh export orders.
Last year, merchandise exports reached $84.4 billion, reflecting a 15.2% increase amid “holiday demand, US agricultural exemptions, and a weaker peso.”
Cash remittances coursed through banks hit an all-time high in December at $3.5 billion, bringing the full-year tally to a record $35.6 billion.
Meanwhile, the UA&P said that it expects further weakening of the peso after the BSP cut its policy rate by 25 basis points (bps) in February.
The Monetary Board lowered the target reverse repurchase rate by 25 bps to 4.25%, the lowest in over three years. This brought the BSP’s total reductions to 225 bps since it began monetary policy easing in August 2024.
OIL PRICESMeanwhile, National Statistician Claire Dennis S. Mapa said that he expects oil prices to remain a top risk for inflation in February.
“One possible risk for February is the price of oil because every week the price of oil increases,” he told reporters on the sidelines of an event on Wednesday.
“But I have to look at the data, but I got reports that there are weekly increases… so we have to see if those increases, the total increase, are higher than the same period last year,” he added.
Pump prices on Tuesday jumped for an eighth straight week as global crude oil prices continued to rise amid persistent volatility in the global oil market, driven by escalating geopolitical tensions.
Fuel retailers raised gasoline prices by P0.60 per liter, diesel by P1.20 per liter, and kerosene by P1.20 per liter.
In general, Mr. Mapa said that the BSP expects inflation to be higher compared to 2025, as there are “base effects that we are considering.”
“If there are no interruptions in the second half, meaning there are no typhoons, usually the first half prices of commodities will carry over to the second half,” he added.
The BSP expects inflation to average 3.6% this year, faster than the nine-year low of 1.7% in 2025. — Justine Irish D. Tabile
