By Aubrey Rose A. Inosante, Reporter
THE Philippine economy is more likely to grow by 5.3% this yr, driven by robust domestic demand, although private investment risks persist amid the graft scandal, the ASEAN+3 Macroeconomic Research Office (AMRO) said on Wednesday.
In its latest Regional Economic Outlook quarterly update, AMRO sees Philippine gross domestic product (GDP) expanding by 5.3% in 2026, unchanged from its annual consultation report released in November.
This continues to be inside the federal government’s revised 5-6% GDP growth goal for 2026.
“The image for the Philippine economy is that it has been quite regular, but there are some headwinds against (this outlook) on the investment side,” AMRO Chief Economist Dong He said in a virtual news briefing on Wednesday.
“Private investment in fact, must be supported by investor confidence, and the general public investment had been affected by a number of the, for instance, flood control controversy,” Mr. He said.
If realized, the Philippines is predicted to be the second fastest-growing economy in Southeast Asia this yr, after Vietnam’s 7.6%.
The country’s growth will likely outpace Cambodia (5.1%), Indonesia (5%), Laos (4.6%), Malaysia (4.4%), Singapore (3%), Myanmar (2.5%), Thailand (1.7%), and Brunei (1.6%).
The Philippines’ GDP growth would even be above the region’s average growth of 4.6% for 2026.
For 2025, AMRO said the Philippine economy likely grew by 5.2%, falling wanting the federal government’s 5.5-6.5% goal.
Mr. He also noted that the “fairly weak” third-quarter growth in 2025 prompted a downgrade in forecasts from the October update.
A flood control corruption scandal has weighed on growth, investor confidence and consumption.
Within the third quarter, GDP grew by 4%, the weakest growth in over 4 years, bringing the nine-month average to five%.
Fourth-quarter and full-year 2025 GDP data might be released on Jan. 29.
Mr. He said private consumption, which accounts for over 70% of the economy, will proceed to stay firm, however the corruption scandal hit the investment side, he added.
Meanwhile, AMRO kept its headline inflation forecast for the Philippines at 3.2% this yr, matching the Bangko Sentral ng Pilipinas’ (BSP) full-year projection.
Inflation settled at 1.7% in 2025, the slowest pace in nine years or since 2016.
MAIN RISKS
Meanwhile, AMRO said climate-related risks and artificial intelligence (AI), which put pressure on the country’s service exports sector, are the 2 primary risks for the Philippine economy.
Mr. He also said that while the economy has expanded “steadily,” growth stays below its pre-pandemic trajectory.
“What’s necessary is absolutely to strengthen governance, strengthen investor confidence, and prioritize investments or prioritize public spending so the economy will develop into more resilient (against the primary risks),” he said.
Last week, the federal government unveiled “big daring reforms” before the private sector to counter the slide in investor confidence amid a corruption scandal.
Mr. He said these risks highlight the necessity to upgrade human capability and human capital to suit the AI age, in addition to strengthen infrastructure to make it resilient amid natural disasters.
“With a purpose to maintain resilience and even aim higher to return to earlier trajectory of growth, we expect that the general public policies should really concentrate on strengthening resilience, particularly in light of the 2 primary risks facing the Philippines in the long run,” he added.
AMRO added that within the near term, authorities have room to ease monetary policy and deploy fiscal support to assist the economy.
“I feel when it comes to policies, in fact, within the short term if there are shocks that hit the economy, monetary policy and monetary policy can be the primary policy instruments that the federal government can use,” he said.
The BSP has reduced its benchmark rate by a complete of 200 basis points since August 2024, bringing the policy rate to a greater than three-year low of 4.5%.
REGIONAL GROWTH TO MODERATE
Meanwhile, the ASEAN+3 region is projected to grow by 4% this yr, moderating from the regional growth forecast of 4.3% in 2025 amid softer external demand.
ASEAN+3 includes the ten Association of Southeast Asian Nations (ASEAN) member states plus China, Hong Kong, Japan and South Korea.
ASEAN is forecast to expand by 4.6% this yr, barely slower than 4.8% estimate in 2025.
“While domestic demand is projected to stay firm and proceed supporting growth, higher US tariffs and protracted policy uncertainty are expected to weigh on external demand, resulting in more moderate growth in 2026,” AMRO said.
The US began imposing a 19% reciprocal tariff on many goods from the Philippines, Cambodia, Malaysia, Thailand, and Indonesia in August 2025.
The think tank noted that overall risks to the regional outlook have develop into “more balanced,” though downside risks persist and uncertainty continues to rise.
AMRO also flagged five downside risks that might weigh on the region’s baseline forecast for 2025 to 2026, including heightened protectionist measures and a possible slowdown in technology demand.
It also warned that further escalation of US trade measures may dampen regional activity, amid concerns that tariffs might be imposed on sectors currently exempted, resembling semiconductors.
Other aspects that might undermine regional growth within the near term include potential slowdowns in major economies, surging global commodity prices, and increased financial market volatility.
AMRO said long-term risks include geoeconomic confrontation and policy uncertainty from geopolitical tensions, failure of climate change mitigation and adaptation, natural disasters, and extreme weather events.
It added that cyber insecurity, frontier technology risks, weak preparedness for infectious disease outbreaks, and inadequate planning for an aging population could further weigh on the region in the long term.
Despite these risks, the AMRO noted potential upside, resembling strong global semiconductor demand and sustained foreign direct investment (FDI) commitments.
“Strong technology demand and robust FDI inflows into emerging sectors, including advanced electronics, electric vehicles, and digital services, have helped cushion growth despite ongoing tariff headwinds,” Mr. He said.