Market Update: Study forecasts 5% growth for PH economy in 2026 – Full Analysis

THE early release of the budget to local government units (LGUs) and the projected continuation of a manageable inflation environment are seen to provide leeway for a five 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 five percent,” according to 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.

This projection is within the government’s five to six percent growth target this year.

Last week, the Philippine Statistics Authority (PSA) reported that domestic growth, as measured by GDP, further decelerated to three 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 five percent.

The Department of Budget and Management released the budget allocation of P1.19 trillion to the LGUs under the National Tax Allotment, in line with President Ferdinand Marcos Jr.’s directive to ensure the uninterrupted delivery of basic services.

Past practice

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 turnout 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 the 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’ two to four 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.” / PNA