The early release of funds to local government units and expectations of manageable inflation are expected to support at least 5 percent growth in the domestic economy as early as the first quarter of 2026.
“We expect Q1 and full-year GDP [gross domestic product] growth to exceed 5.0 percent,” according to the January 2026 issue of The Market Call, a capital markets research publication of the Business Economics Club and the University of Asia and the Pacific.
This outlook falls within the government’s 5–6 percent growth target for the year.
However, recent data show weaker momentum. The Philippine Statistics Authority (PSA) reported that GDP growth slowed to 3 percent in the fourth quarter of 2025, down from 3.9 percent in the previous quarter.
Full-year growth stood at 4.4 percent, lower than the previous year’s 5.7 percent and below the government’s downwardly revised 4.8–5 percent target.
To support economic activity, the Department of Budget and Management released PHP1.19 trillion to local government units (LGUs) under the National Tax Allotment, following President Ferdinand R. Marcos Jr.’s directive to ensure uninterrupted delivery of basic services.
The 1987 Constitution and the Local Government Code mandate this allocation, which serves as the primary funding source for LGU programs, projects, and services. Previously, the funds were released on a staggered basis.
The report noted that its economists “got wrong-footed” by several positive developments in late 2025, including low inflation, improved business conditions, and stronger employment, but said a positive outcome remains possible this quarter.
The external sector continues to show resilience, with exports of goods expanding by 14.1 percent despite global challenges, including US trade policies.
Inflation is projected to average 1.4 percent in the first quarter, below the government’s 2–4 percent target range.
The Bangko Sentral ng Pilipinas this month projected another 25 basis points rate cut, “which should provide a boost not only to the bonds and equities markets, but also for business in general, and private construction, in particular.”
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