Growth seen on track again by Q2 as sentiment recovers

ECONOMIC GROWTH will crawl back into the government target range by the second quarter as sentiment recovers, driven by renewed infrastructure spending, University of Asia and the Pacific economist Bernardo M. Villegas told reporters.

Speaking on the sidelines of a forum on Wednesday, Mr. Villegas said: “The drivers will be a renewed emphasis on infrastructure. I think the corruption problem is not going to (run for much longer). In the first quarter, the government will demonstrate that it can actually implement infrastructure projects.”

“Infrastructure will recover. And then you see foreign direct investors not really being discouraged by the corruption.“

Mr. Villegas expects full-year gross domestic product (GDP) growth to average 5.6%, which would be within the government’s 5% to 6% target.

“In the second quarter we could already be back within the target. I think in the whole year it will be about 5% to 5.6%. Probably in the first quarter it will start at 5%…because it’s also growing from a low base.”

GDP growth slowed to 3% in the fourth quarter of 2025 from 5.3% a year prior and the revised 3.9% in the third quarter.

This brought the full-year average to 4.4%, well below the government’s 5.5%-6.5% goal. Growth in 2025 was the weakest annual expansion since the 3.9% posted in 2011, if the 9.5% contraction in 2020 due to the pandemic is excluded.

Mr. Villegas added that economic growth over recent years has put the country on track to achieving upper middle-income country (UMIC) status by September.

The Philippines has remained in the lower middle-income category since 1987, with gross national income (GNI) per capita hitting $4,470 in 2024.

This was only $26 shy of the World Bank’s adjusted GNI per capita bracket of $4,496-$13,935 for UMIC status.

The bank is scheduled to release its updated annual country status thresholds in July.

However, Mr. Villegas noted the global economic slowdown due to the US tariffs presents a potential risk to the growth outlook.

“There will be a slowdown, definitely… because of the tariffs being imposed on all the exporting countries. But we’re not really affected,” he added.

He concurred with an estimate of 6% growth potential issued by Economy Secretary Arsenio M. Balisacan, noting it could be achieved by next year.

Meanwhile, Mr. Villegas said the peso will likely trade between P58 and P59 to the dollar this year as the central bank seeks to keep the peso at levels favorable to overseas Filipino workers (OFWs) and the business process outsourcing (BPO) industry.

“I don’t see the peso ever going beyond P60. The central bank is very, very skillful in controlling that. And our reserves are very large… There’s a psychological barrier that the central bank is very careful not to surpass.”

Mr. Villegas also expects inflation to average around 2% to 3% this year, within the Bangko Sentral ng Pilipinas’ 2-4% target band. — Aaron Michael C. Sy