The Philippines is expected to face a period of slower economic growth and a weakening peso beyond President Marcos' term, according to recent analyses. ANZ Research, for instance, has significantly cut its GDP growth forecast for the Philippines to 3.9% for 2026, down from 4.7%, and to 5% for 2027, from a previous 5.6%. This comes as the economy posted a weaker-than-expected 2.8% growth in the first quarter of 2026, the slowest since the pandemic. For 2028, ANZ anticipates growth of 5.5%, still below the government's 6%-7% target.
Several factors contribute to this subdued outlook. A major flood control corruption scandal in late 2025 significantly impacted public and business confidence, leading to reduced investments and government spending. Economic Planning Secretary Arsenio Balisacan indicated that growth for 2026 is now expected to be between 3.5% and 4.5%, below the government's earlier forecast of 5% to 6%. This reflects slower spending in the aftermath of these corruption allegations and accelerated inflation driven by higher global oil prices.
Inflation remains a key concern. ANZ Research expects inflation to exceed the Bangko Sentral ng Pilipinas' (BSP) 2%-4% target over the next three years. The BSP projects inflation to average 6.4% this year, 4.5% in 2027, and 3.1% in 2028. Inflation for May eased slightly to 6.8% from 7.2% in April but remains well above the central bank's target. In response, the BSP has raised key borrowing costs by 25 basis points to 4.75% for a second consecutive meeting, with ANZ predicting two more 25-basis-point hikes this year, bringing the benchmark interest rate to 5.25%.
Adding to the challenges is the Philippines' weak external position. The central bank forecasts a current account gap of $20.3 billion, or -4% of GDP, for 2026, wider than the $16.3 billion deficit (-3.3% of GDP) recorded in 2025. This balance of payments problem is described as acute for the Philippines compared to its Asian peers. Furthermore, lingering governance issues from the flood control scandal are expected to prevent a significant rebound in public spending, which only grew by 3.22% in the first quarter of 2026.
The World Bank, in its Global Economic Prospects report, maintains its GDP growth forecasts for the Philippines at 3.7% in 2026 and 5.6% in 2027, and projects 5.6% growth in 2028, still below the government's target. This collective sentiment from various analytical bodies points to a challenging economic landscape for the Philippines in the coming years, marked by persistent inflation, higher interest rates, and the residual impact of governance issues on public finances and investor confidence.
