Economic growth is expected to begin recovering in the first quarter of 2027 as the government ramps up public spending, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said Thursday.
Remolona told reporters that the long-awaited rebound in gross domestic product (GDP) growth could begin early next year, citing the expected recovery in activity as a key consideration in the BSP’s decision to deliver a 50-basis-point “jumbo” rate hike.
“We expect the economy to recover by Q1 of 2027,” he said.
“We expect fiscal spending to rise. And then with that, sentiment will improve and investment will go up.”
Growth slowed to 2.8 percent in the first quarter of 2026 as delays in public infrastructure projects linked to the flood control scandal coincided with the onset of the Middle East war in March, straining purchasing power.
Growth weakened further to 2.3 percent in the second quarter, its slowest pace since 2009 outside the pandemic recession, as the Gulf conflict drove up domestic fuel prices and other costs.
Remolona’s latest remarks mark a shift from his earlier outlook. After the BSP’s 27 August rate hike, he said the central bank expected growth to recover by the fourth quarter of 2026.
“I believe the government has been working strenuously to accelerate infrastructure spending, and we expect that growth will recover by the fourth quarter of 2026,” he said after the BSP’s third consecutive rate hike this year.
In the immediate aftermath of last year’s flood control scandal, Remolona had forecast a recovery by the first quarter of 2026. He later pushed back that timeline to the second half of this year after the release of weaker-than-expected fourth-quarter 2025 growth data.
Remolona has stressed that the BSP does not use monetary policy to directly support economic growth. While price stability remains the central bank’s primary mandate, GDP growth is also a consideration when it decides whether to raise or cut rates. Higher rates can weigh on consumption, the main driver of the Philippine economy.
On Thursday, Remolona said lower inflation could help restore business and consumer confidence, which remains broadly pessimistic based on the BSP’s latest surveys.
“If inflation comes down and sentiment will also improve, then that will help the recovery,” he said.
The Asian Development Bank and International Monetary Fund expect growth to rebound in the second half of 2026, driven by a recovery in public infrastructure spending.
However, latest Department of Budget and Management data showed infrastructure and other capital outlays totaled P457 billion from January to July, down P256.5 billion, or 36 percent, from the same period last year.
Bank of the Philippine Islands lead economist Emilio Neri Jr. said a potential economic recovery could give the BSP more room to raise rates as it continues to combat rising inflation, which reached a three-year high of 7.2 percent in September.
“Stronger economic activity could give the BSP greater flexibility to tighten policy further,” he said.
Remolona also left the door open to further rate hikes, saying unexpected increases in oil prices and transport fares, as well as El Niño, could prompt another jumbo hike at the BSP’s final policy meeting in December or later.
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