Metrobank expects the Philippine economy to recover moderately this year after a difficult 2025. The year started with uncertainty from US economic policies, which affected global markets. While the Philippines seemed less affected at first, the local economy weakened as the peso fell and people spent less.
“Coming from a year of surprises, we are expecting a better 2026 as both global and domestic economies recover,” Metrobank said.
After a mild recession last year, the US economy is expected to grow moderately in 2026, though demand and the job market remain weak. Inflation may stay above the Federal Reserve’s target, but the Fed could lower interest rates to support growth.
Metrobank expects the US central bank to cut the Federal Funds Rate by 100 basis points this year, bringing the rate to 2.50–2.75% by the end of 2026. A stronger US dollar is also likely as conditions improve.
The Bangko Sentral ng Pilipinas (BSP) is likely to reduce policy rates further in 2026. Metrobank said a total of 50 basis points in cuts could bring the target reverse repurchase (RRP) rate to 4.00% by year-end, widening the interest rate gap with the Fed to about 125 bps.
“With inflation expected to move back within target and economic activity still soft, the BSP has room to ease further,” Metrobank said.
Domestic growth and spending
Q3 2025 GDP came in weaker than expected, mainly because people spent less and government spending stayed low. Private consumption fell to levels not seen in over 15 years, while exports held up better than expected despite US tariffs.
For 2026, government spending is expected to grow, partly through cash transfers to households, while private investment should improve as policy rates move closer to neutral. Metrobank said these factors, along with easing inflation, could support stronger GDP growth, though progress may be limited by high consumer debt and cautious spending.
Philippine inflation is projected to reach 3.3% in 2026, up from an estimated 1.7% in 2025, as demand picks up and base effects fade. Higher import costs and a weaker peso may also push prices up. Metrobank forecasts the dollar-peso exchange rate (USD/PHP) to rise in line with a stronger dollar and ongoing uncertainties abroad.
Metrobank said 2026 looks better than last year, with easing inflation, a more supportive policy environment, and improving growth. Challenges remain, especially with external factors and investor confidence, but steady policy support and effective reforms could help the Philippine economy recover gradually.