THE PHILIPPINES’ economic growth outlook for 2025 and 2026 could weaken as a widening flood control corruption probe erodes business confidence and dampens infrastructure spending, Fitch Solutions unit BMI said.
“For now, we are maintaining our growth forecast due to further monetary easing ahead, but risks to growth are tilted to the downside,” BMI Asia Country Risk Analyst Brandon Ong said in a webinar on Thursday.
The challenge will be containing the impact on business confidence from governance issues linked to infrastructure spending, he added.
The country’s gross domestic product (GDP) expanded by an average of 5.4% in the first half of 2025. BMI expects full-year growth to hold at 5.4%, missing the government’s 5.5% to 6.5% target.
For 2026, the firm projects GDP growth to ease further to 5.2% as corruption concerns and slower public investment weigh on sentiment.
Mr. Ong noted that infrastructure spending could remain weak in the coming quarters as fiscal authorities tighten oversight of projects.
“You can see the Finance secretary and the Budget secretary coming in and explaining that they are anticipating infrastructure spending to slow down,” he said.
“Infrastructure spending has slowed by about 25% year on year,” he added, noting that if infrastructure spending remains weak, “we will likely see a drag on growth in the coming quarters.”
Government data showed that infrastructure and capital outlays dropped 21.8% year on year to P84.9 billion in August.
BMI said the Bangko Sentral ng Pilipinas’ (BSP) easing cycle could help offset some of the slowdown. “We recently revised our forecast with an additional 25 basis points (bps) in cuts to 4.5% by 2025 and a further 50 bps to 4% by 2026,” Mr. Ong said.
Earlier this month, the BSP lowered its benchmark rate by 25 bps for the fourth straight meeting, bringing the policy rate to 4.75%, the lowest since September 2022. The central bank has trimmed a total of 175 bps since starting its easing cycle in August 2024.
BSP Governor Eli M. Remolona, Jr. earlier said further rate cuts could extend into 2026 to support private investment and business confidence amid governance concerns and slower public sector spending.
BMI also said the scandal has significantly weakened the local stock market, with the Philippine Stock Exchange index (PSEi) plunging below the 6,000 mark last month to a six-month low.
“The alleged corruption scandal has damaged business confidence,” Mr. Ong said. “The PSEi has tumbled significantly since this scandal really burst into light in September.”
“And even though some losses have been [recovered] since, we’re still seeing that the index has traded just above 6,000 points,” he added.
The benchmark index closed at 5,953.46 on Sept. 30, its weakest finish since April 7.
On Thursday, the PSEi rose 0.38% or 23.09 points to close at 6,053.96, while the broader all-share index fell 0.28% or 10.20 points to 3,637.58. — A.M.C. Sy
