ECONOMIC growth will likely post a first-quarter rebound given latest indicators, the University of Asia and the Pacific (UA&P) said, but at a pace slower than forecast at the start of the year.
With the government needing to improve spending following cutbacks in the wake of a massive corruption scandal, it warned that the full-year result could be a slowdown from 2025, which marked a third straight year of missed growth targets.
In the latest edition of The Market Call report, the UA&P said that it expected a “mildly faster” January-March expansion of 3.3 percent after the 3.0-percent slowdown seen in the last three months 2025.
The projection is markedly lower than the above 5.0 percent forecast in January, which the UA&P had hinged on budget releases to local governments.
“Although lingering doubts about a strong economic rebound dominate, some positive signs have begun to appear,” the UA&P said in the February report.
The purchasing manager’s index for manufacturing rose in January, it noted, and the volume of production for the sector also turned positive in December.
Exports and capital goods imports also surged as 2025 ended while remittances hit an all-time highs in December, the UA&P added.
With inflation staying with target and the peso having weakened, “we anticipate that consumer activity — including household spending, home purchases, car sales, equipment leasing, and other interest-sensitive outlays — will improve in the first quarter,” it said.
“As a result, we project that GDP growth will pick up slightly to 3.3 percent year on year in Q1, up from 3.0 percent previously, though government spending still needs to accelerate.”
As a result, it said that economic growth could end 2026 at 4.2 percent, slowing from 4.4 percent in 2025 and missing the government’s 5.0- to 6.0-percent target for the year.
The UA&P noted that the Bangko Sentral ng Pilipinas (BSP) had stopped saying that it was “nearing the end of the easing cycle” in its latest policy statement, instead highlighting “uncertainty” and “confidence,” which will likely lead to further rate cuts as early as April.
Inflation, meanwhile, is expected to edge up but remain within target.
As for fixed income securities, the UA&P said its expected an “across-the-curve decline [in] yields” this month with investors staying cautious on inflation and global financial markets.
However, it said the “inflation acceleration narrative is overblown” as the seasonally adjusted rate slowed in January from a month earlier.
The local stock market, meanwhile, was said to have shown “encouraging behavior” and could see a slight rise following the BSP’s latest rate cut.
Investors could stay defensive given jitters on Wall Street and the outcome of fourth-quarter and full-year corporate earnings, the UA&P said, while news that Semirara’s mining rights would be auctioned off could deter foreign funds as, in the absence of wrongdoing, such contracts are usually renewed.
