Nomura Global Market Research has lowered its 2026 gross domestic product (GDP) growth forecast for the Philippines to 5.3 percent from 5.6 percent, citing a sharp drop in public sector spending amid an ongoing corruption scandal.
The revised outlook represents a “more modest” pickup from the expected 4.7 percent growth in 2025. Nomura attributed the downward revision to fiscal tightening triggered by the controversy surrounding a flood control project.
“The inadvertent fiscal tightening due to the corruption scandal is substantial and will likely persist for a while, hurting GDP growth materially through H1 2026 before staging a recovery in H2, as the government implements catch-up spending plans,” the Japanese firm said.
Growth in the first half of 2026 is projected to be 4.6 percent, rebounding to 6.0 percent in the last two quarters.
Meanwhile, Nomura expects the Bangko Sentral ng Pilipinas (BSP) to cut policy rates by another 75 basis points (bps) during the current easing cycle, amid by the central bank’s pro-growth stance and still benign inflation.
Nomura pencils in a 25-bp cut at the BSP’s December meeting and further 25 bp cuts in each of February and April 2026, which would bring key policy rates down to 4.00 percent.
BSP Governor Eli Remolona Jr. acknowledged that 2025 growth is expected to be slow, likely between 4 percent and 5 percent.
He told reporters Wednesday that recovery should begin by mid-2026, and the economy should be back on track by 2027.
Remolona linked the gradual recovery to both the cutback in government spending and a loss of investor confidence due to the corruption scandal.
“Part of the decline in 2025 is because the government also cut its spending in order to review the flood control projects and other projects. But the main reason is probably the loss of confidence by investors,” he said.
Remolona noted that confidence might be returning, pointing to the recovery of the stock market and S&P’s reaffirmation of the country’s positive outlook.
Regarding the prospect of another interest rate cut at the upcoming Dec. 11 policy meeting, he conceded that the odds have risen but remain “not assured.”
