By Aubrey Rose A. Inosante and Katherine K. Chan, Reporters
THE PHILIPPINES risks losing economic momentum in 2026 unless reforms are carried out to increase the lift from election-related spending last yr, in accordance with a state think tank.
Growth last yr has been partly driven by higher household consumption and public outlays tied to the elections, but that boost may fade once the political cycle ends, said John Paolo R. Rivera, a senior research fellow on the Philippine Institute for Development Studies (PIDS).
Without structural reforms, the economy could slow as temporary spending support unwinds, he told a webinar on Thursday.
“But for 2026, we would face post-election risks. Without reforms, momentum will fade, and sustainability is dependent upon reforms, not on political cycles,” Mr. Rivera said.
The state think tank expects Philippine gross domestic product (GDP) to expand by 5.3% in 2026, inside the federal government’s revised 5-6% growth goal.
It also noted that Philippine GDP growth likely averaged 5% in 2025, below the federal government’s 5.5-6.5% goal and slower than the actual 5.7% growth in 2024.
Mr. Rivera noted election years stimulate growth, but its effects are temporary and cyclical. As an example, infrastructure spending was frontloaded in early 2025 ahead of an election ban on public works.
“While fiscal expansions, equivalent to people who we’re seeing at all times during election periods, can temporarily stimulate the economy, and generate economic activities, they will not be substitutes for structural reforms,” he said.
Mr. Rivera said good governance, transparency and accountability are needed to make sure the temporary boost from elections are converted into “durable, real and long-term gains.”
For this yr, Mr. Rivera said the important thing headwinds or risks include a worldwide economic slowdown and rising protectionism amongst developed economies.
“[Add to these] more frequent and severe climate-related shocks, fragile investment recovery, and protracted governance risk. We’d like to observe out for those headwinds,” he said.
At the identical time, PIDS President Philip Arnold P. Tuaño said that election years within the Philippines have been related to faster economic growth, with effects that usually extend to the yr immediately following the elections.
Between 2001 and 2024, average GDP growth during election years was 6.4%, compared with about 4.3% in non-election years, he said.
GDP grew by 6.9% in 2016 and seven.6% in 2022, supported by strong household expenditures and repair activities, he said.
“Taken together, these studies remind us that while election years may provide temporal economic momentum, sustainable growth ultimately is dependent upon credible governance, sound macroeconomic management, and institutions that endure beyond the political cycle,” he said.
RATE CUTS TO SPUR GROWTH
Meanwhile, recent monetary policy easing is anticipated to prop up domestic demand and boost growth this yr, giving the Philippines an edge over its regional peers, Fitch Solutions unit BMI said.
BMI trimmed its growth forecast for the ASEAN-5 region, which consists of Indonesia, Malaysia, the Philippines, Thailand and Singapore, to a median 3.8% for 2026, down from its earlier projection of 4.4%.
“In 2025, the ASEAN-5 benefited from the frontloading of exports,” BMI said in a report dated Jan. 12. “As this frontloading is paid back in 2026, nonetheless, we expect export growth to moderate across the ASEAN-5, weighing on regional growth.”
“Nonetheless, we expect the Philippines and Indonesia to buck regional trends, with growth accelerating in 2026 as robust domestic demand offsets their relatively smaller, less-exposed external sectors,” it added.
The Fitch unit expects the Philippine economy to expand by 5.2% this yr.
Also, BMI sees room for a 50-basis-point (bp) cut this yr to bring the important thing policy rate at 4% or the bottom since August 2022.
It noted that a more accommodative monetary policy will help the economy get well from last yr’s slump.
“For the Philippines, easier monetary policy will regularly feed through while infrastructure spending will rebound from the disruptions brought on by the probe into misappropriated funds earmarked for flood control,” BMI said.
Severe flooding last yr exposed multiple anomalous flood control projects nationwide, sparking public outrage and investigations that uncovered corruption amongst Public Works officials, lawmakers and personal contractors behind the administration’s infrastructure program.
The economy saw its weakest growth in over 4 years at 4% within the July-to-September period because the scandal slowed government spending and household consumption. As of the third quarter, GDP growth averaged 5%.
A dim growth outlook and weak investor sentiment, coupled with benign inflation, prompted the Monetary Board to deliver a fifth straight 25-bp reduction on the Dec. 11 meeting. This brought its total cuts to 200 bps since August 2024, lowering the benchmark rate of interest to 4.5%.
Since then, the central bank has repeatedly said that they’re approaching the top of the present easing cycle, with BSP Governor Eli M. Remolona, Jr. noting that the policy rate is already “very close” to where they need it to be.
Nonetheless, Mr. Remolona left the door open for a sixth straight 25-bp cut, adding that a weaker-than-expected GDP growth could prompt them to slash key borrowing costs twice this yr.
The Monetary Board is about to have its first rate-setting meeting for 2026 on Feb. 19.
Meanwhile, BMI noted that central banks across the region will likely be less aggressive in cutting rates as inflation is anticipated to choose up this yr.
“Despite the commonly less upbeat outlook for the ASEAN-5, we’re still projecting fewer rate cuts in 2026, compared with 2025,” it said. “One reason is that inflation will rise back towards policy targets or long-term averages in 2026, lowering real policy rates across ASEAN-5.”
BMI forecasts Philippine inflation to settle at 3.1% by yearend, barely below the three.2% seen by the BSP but on the midpoint of its 2%-4% goal.