The Marcos administration remains optimistic about the country’s economic outlook for 2026.

In a meeting on Wednesday, 26 November with Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr., President Ferdinand R. Marcos Jr. discussed the October 2025 monetary policy decision and the economic prospects for next year.

Marcos and Remolona acknowledged the economy’s sluggish performance this year, highlighted by the sharp slowdown in third-quarter Gross Domestic Product (GDP) growth to 4.0 percent — the weakest in nearly two years.

Optimistic for recovery early 2026

Despite this, they expressed optimism that recovery could take place as early as the start of 2026 and a return to the government’s growth target range by 2027.

The economic team previously set a GDP growth target of 5.5 to 6.5 percent for 2025, and 6 to 7 percent for 2026. The third quarter (Q3) drop — 1.5 percentage points lower than the previous quarter — was largely attributed to the flood control scandal within the Department of Public Works and Highways (DPWH).

Public infrastructure spending contracted by 26 percent during the quarter amid nationwide backlash, significantly impeding overall growth.

FDIs plunge

Foreign direct investments (FDIs) have plunged since Marcos publicly flagged anomalies in flood control projects earlier this year.

In August, FDIs fell 40.5 percent to $494 million from $830 million a year earlier. The peso also weakened to a record P59.17 per US dollar as fallout from the scandal intensified.

Despite political and fiscal turbulence, the administration and the BSP emphasized that inflation remains low — currently at 1.7 percent overall, with inflation for the bottom 30 percent of households at –0.4 percent.

Room for the BSP to ease liquidity conditions

The benign inflation environment provides room for the BSP to ease liquidity conditions further, including a possible additional 25-basis-point cut in the reserve requirement ratio (RRR).

Remolona said the BSP has already lowered the RRR this year to help stimulate demand.

On Wednesday, Standard & Poor’s (S&P) reaffirmed the Philippines’ long-term sovereign credit rating with a positive outlook, citing strong macroeconomic fundamentals. The agency, however, warned that the slowdown in infrastructure spending remains a near-term risk.

Healthy long-term growth trajectory

“The ongoing investigation into flood control projects has halted some infrastructure works. The resultant slowdown in public capital expenditure will dent GDP growth this year. However, we believe this will not derail the country’s long-term growth trajectory, which remains healthy,” S&P said.

Both the BSP and the Department of Finance (DoF) welcomed the rating affirmation, describing it as an important signal for investors and lenders.

“Having a high credit rating will benefit Filipinos because this means cheaper financing for the government, and in effect, more resources for essential public services. This supports our goal of uplifting the life of Filipinos,” said Finance chief Frederick Go.

Confident about reducing RRR

Both Marcos and Remolona noted that the inflation outlook is strong enough for the Philippines to be confident about reducing the RRR.

For 2026, the inflation forecast stands at about 3.1 percent, well within the BSP’s target of two to four percent, while the 2027 target stands at 2.7 percent.

Marcos reiterated his commitment to preserving economic stability and creating conditions for sustained, broad-based growth.