Early release of local governments’ budgets and low inflation will spur economic growth in the country, UA&P Capital Markets Research said in its January 2026 Market Call report.
While gross domestic product (GDP) growth dropped to 4.4 percent in 2025 from 5.7 percent in 2024, the report said this could rebound to above 5.0 percent in the first quarter this year, “since NG (the national government) has released [the] P1.6-T (trillion) budget to local governments.”
Inflation, which is expected to remain supportive of growth, is seen to fall to 1.2 percent, following a full-year inflation print of just 1.7 percent in 2025.
“Low inflation remains the bright spot,” the report noted, adding that this should help encourage consumer spending because interest rates are expected to ease.
“We expect the Bangko Sentral ng Pilipinas to cut rates by 25 bps (basis points) in its February meeting,” which could further support investment and borrowing activity.
However, not all sectors are forecast to recover at the same pace.
“Industrial output indicators seem lukewarm,” as the November volume of production index contracted by 1.5 percent year on year, and ”infrastructure spending will be subdued from high interest rates limiting private construction,” the report pointed out.
Reforms
Meanwhile, the American Chamber of Commerce of the Philippines (AmCham) said reforms were needed to recover from the economic growth slowdown.
“By ensuring accountability and making tangible improvements in transparency, the government can help restore confidence and support renewed investment that will help increase growth in the coming quarters,” AmCham Executive Director Ebb Hinchcliffe said in a statement .
The 4.4-percent GDP growth, which missed the government’s 5.5- to 6.5-percent target, came as a massive corruption scandal affected public spending and investor sentiment.
It also marked a third year of missed growth targets and was the slowest expansion since 2011’s 3.9 percent. The economy contracted 9.5 percent in 2020 during the Covid crisis.
Other business groups, including the Philippine Chamber of Commerce and Industry, Management Association of the Philippines, Makati Business Club and the Federation of Philippine Industries, have all urged the government to undertake reforms.
The Development Budget Coordination Committee has lowered economic growth targets for the remainder of the Marcos Jr. administration due to continued global uncertainties and the impact of the flood control corruption scandal.
This year, the goal is between 5 and 6 percent, and 5.5 to 6.5 percent in 2027.
