Metrobank is projecting a firmer rebound for the Philippine economy in 2026, anchored on a recovery in public construction and the lagged impact of monetary easing, even as growth this year remains weighed down by what it describes as a temporary “fiscal freeze.”
In an economic outlook presented during Metrobank’s 2025 Market Movers series, chief economist and markets strategist Nicholas Mapa outlined five key calls that shape the bank’s expectations for next year — covering GDP prospects, inflation, interest rates, the yield curve and the peso.
The briefing, themed “Trump, Tariffs, and the Terminal Rate: The New Global Order,” gathered Metrobank’s Private Wealth and corporate clients.
To reinforce its analysis, Metrobank partnered with CreditSights and BMI, both research firms under global credit rater Fitch.
‘Two-pronged boost’
Mapa said the economy is likely to see a “two-pronged boost” in 2026 as public construction resumes and the delayed effects of monetary easing begin to filter through.
He noted that the current slowdown, brought about by constrained fiscal spending, is likely to be temporary, with capital formation and investment activity expected to regain momentum next year.
On growth, Metrobank anticipates that the drag from this year’s fiscal consolidation will continue to affect the near term, but that the broader economy should gradually recover as government spending normalizes.
Inflation, meanwhile, is expected to accelerate from its subdued performance this year and approach the BSP’s 4 percent ceiling by mid-2026.
Projected uptick
This projected uptick will reflect base effects and possible increases in global commodity prices, potentially influenced by US-imposed tariffs. Despite the upward trend, full-year average inflation is still forecast to stay within the BSP’s 2 to 4 percent target range.
Mapa also said the BSP is likely to maintain a dovish stance even after the expected policy rate cut in December. With inflation still within its target band, the central bank will likely keep its focus on supporting growth.
The BSP has already reduced its policy rate by a total of 175 basis points from the peak of 6.50 percent, bringing the benchmark rate down to 4.75 percent after its fifth policy meeting on 9 October.
Monetary adjustments
These monetary adjustments are expected to influence the yield curve, which Metrobank sees steepening in 2026.
