MANILA, Philippines — Ty-led Metropolitan Bank and Trust Co. (Metrobank) is projecting a gradual recovery for the Philippine economy in 2026, alongside potential monetary easing by year-end.
Speaking at the bank’s 2025 Market Movers series, Metrobank chief economist and markets strategist Nicholas Mapa said the economy may regain momentum next year as infrastructure activity resumes and the effects of earlier rate cuts filter through.
Economic managers, through the Development Budget Coordination Committee (DBCC), have set a gross domestic product (GDP) growth target of six to seven percent for 2026, up from 5.5 to 6.5 percent for 2025.
Mapa said growth could get a dual lift in 2026 from “a return of public construction and the delayed effects of monetary easing,” noting that this year’s government spending slowdown weighed heavily on activity.
He said the temporary “fiscal freeze” this year may temper near-term expansion, but the outlook improves by 2026 as capital formation and investment “start to gain back momentum to fuel the country’s growth.”
Inflation is projected to rebound and approach the Bangko Sentral ng Pilipinas (BSP)’s four percent ceiling by mid-2026, after easing below the two percent target this year.
Mapa said base effects and possible increases in global commodity prices would drive gains, “possibly fanned by US-imposed tariffs.”
Despite this, full-year inflation is still expected to remain within the BSP’s two to four percent target.
Mapa sees the Monetary Board remaining dovish even as inflation is expected to drift higher next year.
The BSP is expected to begin easing as early as December after cutting a total of 175 basis points, which brought the benchmark rate to 4.75 percent at its Oct. 9 meeting.
With price stability still within reach, he said the central bank would likely “stay focused on supporting sagging growth momentum.”
The yield curve is expected to steepen as rate cuts anchor short-end yields. Long-term rates, meanwhile, could rise as the government shifts borrowing toward 10-year issuances and inflation edges higher. Expectations of further easing will likely keep short-term yields in check.
Meanwhile, Mapa said a “weak dollar story may continue next year” as the US Federal Reserve extends its rate-cutting cycle, but domestic factors could keep the peso under pressure. The Philippines is projected to run a current account deficit in 2026 and 2027, which may weigh on the currency.