By Justine Irish D. Tabile, Senior Reporter
THE PHILIPPINE ECONOMY could see a modest rebound in the fourth quarter, supported by stronger holiday spending, remittance inflows and a possible pickup in government infrastructure spending, although elevated inflation and weak investment may limit the recovery, economists said.
Security Bank Research Head and Chief Economist Angelo B. Taningco said he expects a modest growth recovery in the fourth quarter, supported by seasonal spending and higher inflows from remittances and tourism.
“Our full-year forecast is pegged at 3.0% with expectations for a modest growth recovery this fourth quarter underpinned by holiday spend and more inflows from remittances and tourist arrivals given the relatively cheap local currency,” Mr. Taningco said in an e-mail.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort projected gross domestic product (GDP) growth of 5% in the October-to-December period, citing favorable base effects, catch-up government spending and increased economic activity during the holiday season.
Mr. Ricafort expects the Philippine economy to grow by 3.5% this year, at the lower end of the government’s 3.5%-4.5% growth target.
Maybank Economist Azril Rosli said the economy could grow by 3.2% in the last quarter, bringing full-year growth to 2.7%.
“Downside risks include persistent inflation, tighter financial conditions and continued investment weakness,” he said in an e-mail.
“Tailwinds include seasonal spending, remittance inflows, infrastructure expenditure and a faster-than-expected recovery in consumption and investment,” he added.
De La Salle University Economist Marites M. Tiongco said a faster-than-expected recovery in government infrastructure implementation and private investment could provide support for economic growth.
“The principal potential upside is a faster-than-expected recovery in government infrastructure implementation and private investment, supported by resilient exports and services,” Ms. Tiongco said in a Viber message.
“However, seasonal consumption alone is unlikely to offset sustained weakness in capital formation,” she added.
GROWTH TARGET OUT OF REACH
Despite expectations of a fourth-quarter pickup, economists said another weak third-quarter GDP reading would make it increasingly difficult for the Philippines to meet the government’s growth target this year.
Revised data from the Philippine Statistics Authority (PSA) showed that the Philippine economy grew by 2.4% in the second quarter, slower than the 5.4% growth a year ago and 2.8% in the previous quarter.
This brought average growth in the first half to 2.6%, well below the government’s target for the year.
Meanwhile, a BusinessWorld poll of 16 economists and analysts conducted last week yielded a median GDP growth estimate of 2.7% for the July-to-September period.
The PSA is scheduled to release the third-quarter GDP data on Monday (Nov. 9).
“I consider achieving the lower end of the government’s growth target unlikely, and reaching the upper end highly improbable,” Ms. Tiongco said.
“With first-half growth averaging approximately 2.6%, reaching even 3.5% for the full year would require a substantial acceleration in the second half. Given the current inflation and investment environment, that appears difficult,” she added.
Ms. Tiongco said the combination of elevated inflation and weak investment could undermine both household consumption and future productive capacity.
Inflation accelerated to 7.8% in October from 7.2% in September, bringing the 10-month average to 5.6%, well above the central bank’s 2%-4% target range.
S&P Global Market Intelligence Principal Economist Harumi Taguchi said the firm expects full-year GDP growth to settle at 3.2%.
“Key downside risks include the ongoing US-Iran war, El Niño, an AI-market correction, and persistently weak construction activity,” she said in an e-mail.
Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said the economy would need to grow by around 7% in the last quarter just to reach the lower end of the target, assuming GDP grew by 2.2% in the third quarter.
“Reaching the upper end would require growth of around 11%,” he said.
“Stronger government spending, sustained exports, resilient remittances and holiday consumption could provide some lift, but persistent inflation, restrictive financial conditions, weak confidence and subdued investment remain significant downside risks,” he added.
HIGHER BORROWING COSTS
Economists also warned that higher borrowing costs following the Bangko Sentral ng Pilipinas’ (BSP) latest rate hike could further constrain household spending and business investment, limiting the strength of the recovery.
The BSP delivered a larger-than-expected 50-basis-point (bp) rate hike on Oct. 22, bringing the target reverse repurchase rate to 5.5%, as it seeks to contain broadening inflationary pressures.
University of Asia and the Pacific Economist Marco Antonio C. Agonia said he expects the BSP’s latest rate hike to dampen growth prospects through 2028.
“The BSP’s jumbo rate hike may dampen growth prospects into late 2027 and 2028, as monetary policy actions operate with a roughly two-year lag,” he said in an e-mail.
Mr. Agonia said the impact of higher interest rates could be transmitted through bank lending, squeezing household spending through credit cards, mortgages and auto loan payments.
“Corporates similarly face higher costs of capital which dampens expansion appetite. We expect these to be felt more fully into 2027,” he said.
Mr. Agonia said the government should also pursue supply-side policies to mitigate the impact of commodity price spikes, warning that further monetary tightening may have diminishing returns.
Ms. Tiongco similarly expects the latest rate hike to have a modest dampening effect on growth in the remaining months of 2026, particularly through higher borrowing costs and weaker investment.
“However, because monetary policy works with a lag, the larger impact will likely be felt in 2027,” she said.
She warned that monetary tightening comes at a time when economic growth is already weak and capital formation is contracting.
“The challenge is therefore to restore price stability without further undermining productive investment. Fiscal policy must complement monetary tightening by addressing supply bottlenecks and improving infrastructure implementation,” she added.