Manila: The early release of the budget to local government units and the projected continuation of a manageable inflation environment are seen to provide leeway for a five percent output for the domestic economy as early as the first quarter of 2026.
According to Philippines News Agency, the January 2026 issue of The Market Call, a capital markets research of the Business Economics Club and the University of Asia and the Pacific, indicates that "we expect Q1 and full-year GDP [gross domestic product] growth to exceed 5.0 percent." This projection aligns with the government's 5-6 percent growth target for the year.
Last week, the Philippine Statistics Authority (PSA) reported that domestic growth, as measured by GDP, further decelerated to 3 percent in the last quarter of 2025 from the previous quarter's 3.9 percent. Full-year growth is at 4.4 percent, slower than the 5.7 percent in the previous quarter and below the government's downwardly revised 4.8-5 percent.
The Department of Budget and Management released the budget allocation of PHP1.19 trillion to the local government units (LGUs) under the National Tax Allotment, in line with President Ferdinand R. Marcos Jr.'s directive to ensure the uninterrupted delivery of basic services. The 1987 Constitution and the Local Government Code provide for this policy, with the allocation as the LGUs' main source of funding for local programs, projects, and services. In the past, release of this funding was made on a staggered basis.
The report said that while its economists "got wrong-footed" by several positive developments in the last quarter of 2025 such as the low inflation, better business segment and employment a positive turn-out is not impossible this quarter. This, as the external sector remains resilient, with the Philippines posting a 14.1 percent expansion in exports of goods amid the challenges overseas such as US' trade policies.
In terms of inflation, the report projected price increases to average at a rate of 1.4 percent in the first quarter, still below the government's 2-4 percent target. This month, the Bangko Sentral ng Pilipinas projected another 25 basis points reduction, "which should provide a boost not only to the bonds and equities markets, but also for business in general, and private construction, in particular."
