MANILA, Philippines — The Philippine economy is expected to stay below official growth targets through 2026 and may only return to its intended path in 2027, the Bangko Sentral ng Pilipinas (BSP) said, citing weather disturbances, weakening demand for services and slower government spending as a graft investigation unfolds.
If the projections hold, the country would miss its growth targets for a fourth straight year, after falling short in both 2023 and 2024, according to the highlights of the Monetary Board’s Oct. 9 policy meeting released on Thursday.
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The Marcos administration is aspiring for growth of between 5.5 and 6.5 percent for 2025 and a faster 6 to 7 percent for next year. While those targets may not be met, the BSP said the economy could return to its target range only by 2027, the penultimate year of the Marcos administration.
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“Overall domestic demand may moderate based on high-frequency indicators,” the central bank said.
“In addition, ongoing controversy over flood control projects, public infrastructure spending may delay implementation and dampen investment sentiment,” it added, while noting that initiatives to prevent fiscal leakages could nevertheless boost overall budget efficiency and growth prospects over the longer term.
Last month, the Monetary Board cut the key interest rate by 25 basis points to 4.75 percent, aiming to steady business sentiment shaken by a widening probe into allegedly dubious flood control projects.
Government spending
The central bank had also warned that the corruption scandal could limit the ability of government spending to support growth. As it is, the administration is aiming to keep infrastructure investment at 5 to 6 percent of gross domestic product to help sustain economic momentum.
True enough, the state’s economic managers already acknowledged that hitting even the lower end of the government’s growth target for 2025 would be very challenging, after the economy expanded 4 percent in the third quarter, the weakest pace in four years.
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BSP Governor Eli Remolona Jr. earlier said another rate cut in December was “possible,” but ruled out any aggressive easing that could fuel concerns the economy is careening toward a hard landing.
Remolona added that the economy may “more than catch up” with the momentum lost by 2027, believing that the slowdown may prove to be short-lived. The pace of that rebound, he said, would determine how much further the central bank could ease policy in the months ahead.
Offshore, the central bank also flagged “lingering global uncertainty” that could temper investor sentiment. Even so, it maintained that “future monetary policy adjustments will continue to be guided by evolving risks to inflation and growth.”
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“On balance, the favorable inflation outlook and moderating domestic demand provided scope for a more accommodative monetary policy stance to support economic activity,” the BSP said. INQ