IMF outlook points to a shallow, uneven recovery

The International Monetary Fund projects a modest and uneven economic recovery for the Philippines, with GDP growth slowing to 3.4% in 2026 from 4.4% in the previous year. The IMF has also predicted an increase in unemployment to 5.4% in 2026 and steady inflation averaging 5.6%. Analysts believe that the 2026 forecast suggests only a slight improvement from the weak first half of the year.

To reach the IMF's full-year estimate, the economy would require around 4% growth in the second half of 2026, indicating the importance of public investment execution and household demand. Positive factors for the recovery could be accelerated infrastructure normalization, lower energy prices, and increased investor confidence. However, risks are mainly focused on delayed public capital expenditure, ongoing food and fuel inflation, and a slower employment rate.

The projected current account deficit of 4.8% of GDP also presents an additional challenge due to both the Philippine peso and imported inflation. The report suggests a cautious approach, recommending exposure to defensive sectors, banks with robust funding and reserve buffers, and companies that are well-positioned for eventual investment recovery.

The report urges caution on highly cyclical consumption and rate-sensitive sectors until fiscal execution improves and inflation shows a more consistent decline. The information provided is based on sources the author believes to be reliable but is not guaranteed and should not be considered all-inclusive.