The Philippines is heading into 2026 facing a challenging economic landscape, with both Nomura Global Markets Research and DBS Group Research projecting subdued growth amid political uncertainty, soft fiscal spending and persistent external risks.
Nomura has lowered its 2026 growth forecast for the Philippines to 5.3 percent from 5.6 percent previously, cautioning that rising political uncertainty is weighing on public spending, investor sentiment and the country’s near-term recovery prospects.
In its Asia 2026 outlook, the firm said intensified efforts to address corruption have slowed procurement and project approvals, resulting in delays in public disbursements at a time when the economy is already losing momentum.
“The inadvertent fiscal tightening due to the corruption scandal is substantial and will likely persist for a while, hurting gross domestic product (GDP) growth materially through the first half of 2026 before staging a recovery in the second half, as the government implements catch-up spending plans,” it said.
Nomura’s downgrade puts the Philippines among ASEAN economies expected to underperform next year.
“On aggregate, we forecast ASEAN-5 GDP growth of 4.3 percent in 2026,” it said. “But while this is stable from 2025, it masks a stark differentiation across the region’s economies. We expect Malaysia and Singapore to surpass consensus expectations, while Indonesia, the Philippines and Thailand will likely underwhelm.”
The investment bank pointed to softer household consumption, subdued capital expenditure and slower fiscal disbursements as primary drags. Although cooling inflation and steady remittances should support demand, spending remains vulnerable to price shocks and labor market conditions have yet to normalize fully.
It also highlighted weak investment appetite, noting that both public and private construction have struggled to regain pre-pandemic momentum. Competitive pressures from cheaper imports, lingering policy noise and cautious credit conditions continue to weigh down activity.
Nomura expects the Bangko Sentral ng Pilipinas (BSP) to cut its policy rate by an additional 75 basis points in the current easing cycle, bringing the benchmark rate down to four percent. The firm forecasts a 25-basis-point cut at the Dec. 11 meeting, followed by two more cuts in February and April.
“BSP has already taken a more pre-emptive approach against emerging downside risks to the growth outlook from the corruption controversy,” it said, adding that inflation staying within target is a key requirement. Nomura forecasts inflation to average 1.7 percent this year, before rising to 2.5 percent in 2026.
DBS Group Research likewise expects the Philippines to contend with another year of headwinds.
It said the country’s near-term trajectory remains weighed down by domestic issues and an increasingly complex external environment.
“Building in our forecast for a subdued fourth quarter, 2025 growth is likely to average 4.7 percent versus our earlier forecast of 5.3 percent,” DBS said. The bank expects growth to improve slightly to five percent in 2026.
“As it stands, growth was expected to moderate in the rest of 2025 and next year due to a confluence of domestic and external headwinds, including the impact of typhoons, domestic governance issues (corruption issues from flood control projects), slower fiscal expenditure, and the impact of US tariffs.”
DBS warned that the country’s heavy reliance on electronics leaves it exposed if the next round of US tariff measures expands. “External trade has exhibited relative resilience in the first nine months of the year, though the impact could be material next year if Section 232 announcements bring electronics (more than half of the Philippines’ goods exports) under its umbrella,” it said.
Tariff uncertainty is also eroding earlier advantages. “Philippines’ positive arbitrage was eroded after the rate was raised to 19 percent in Liberation Day 2.0, bringing it on par with the regional peers,” DBS said.
Still, household spending may help cushion the slowdown. DBS noted that “consumption demand should make up for part of the downside, with real purchasing power benefiting from softer inflation, low unemployment rate and loose financial conditions.”
However, it warned that recurring typhoons and weaker sentiment tied to corruption issues could dampen momentum. Part of the “buoyancy will be hurt by sporadic typhoons that hurt farm output and weaker sentiment on the corruption scandals,” it said.
DBS said the BSP has shifted toward accommodation, surprising markets with repeated easing in late 2025. It expects more cuts ahead, saying “the door remains open for further cuts,” with one more reduction likely in December and two more in the first half of 2026.
It acknowledged currency risks in an easing cycle but said rate differentials should remain supported as the US Federal Reserve resumes cutting in 2026.
Both Nomura and DBS anticipate that the Philippines will navigate another period of modest and fragile recovery next year.
DBS described the outlook as a “muddle-through” dynamic as policymakers attempt to balance growth risks, currency pressures and heightened global uncertainty.