Good morning. I will speak in my personal capacity, drawing from the BSP’s assessments and the work of our research teams.
The Philippine economy entered 2026 after a slowdown in 2025, driven mainly by weaker investment, softer household spending, and moderation in government expenditures. Industry and services decelerated, while agriculture showed a modest recovery. Looking ahead, growth is expected to improve gradually, supported by private consumption, steady remittances, targeted public spending on education, health, and social services, the rollout of public‑private partnership projects, and the accelerated use of local government cash balances. That said, the pace of recovery will depend heavily on how quickly business and consumer confidence strengthens.
Inflation expectations remain well anchored, and inflation is projected to stay within the target range over the policy horizon. Temporary pressures from electricity rate adjustments and higher oil prices may emerge around mid‑2026, but inflation is expected to ease as global commodity prices stabilize. In this environment, monetary policy continues to focus on maintaining price stability while remaining responsive to evolving conditions.
From the business perspective, external conditions remain challenging. Trade policy uncertainty, including shifting tariff regimes and sector‑based measures, continues to weigh on global demand and investment planning. While the Philippines’ direct exposure is relatively contained—particularly for electronics and agriculture—uncertainty itself affects decisions along global value chains. Services exports face headwinds from weaker tourism and increasing competition in IT‑BPM, even as opportunities emerge from Global Capability Centers and the move toward higher‑value services.
Technology plays an increasingly important role in this landscape. Artificial intelligence is already influencing export performance, business processes, and service delivery. It offers productivity gains and new opportunities, particularly in IT‑BPM and electronics, but it also raises challenges related to skills mismatches, uneven adoption across firms, and adjustment pressures in certain service‑sector roles.
In this setting, macroeconomic and financial stability remain essential. A low and predictable inflation environment, a resilient financial system, and a safe and efficient payments infrastructure help reduce uncertainty and risk premia, giving businesses the space to plan, invest, and adapt amid global volatility.
Looking ahead to 2026, the key issue for Philippine enterprises is how to navigate external uncertainty while positioning for gradual recovery—by managing risks, investing in skills and technology, and taking advantage of opportunities from regional integration, digitalization, and evolving global value chains.
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