THE PHILIPPINES will likely continue to be an underperformer in the region, with Singapore-based Oversea-Chinese Banking Corp. (OCBC) projecting it to be the second-slowest growing economy in ASEAN-5 until 2027.
In an Aug. 24 report, OCBC Group Research slashed its 2026 gross domestic product (GDP) growth forecast for the Philippines to 3.2% from 3.8% previously.
This would position the Philippines as the second-slowest growing economy in ASEAN-5, and the only country seen to face a sharp slowdown from last year’s 4.4% growth.
The ASEAN-5 (Association of Southeast Asian Nations) region includes the Philippines, Indonesia, Malaysia, Thailand, and Vietnam.
If OCBC’s projections are realized, the Philippines will surpass only Thailand, which is expected to expand by 2.3% this year from 2.4% in 2025.
OCBC projects ASEAN-5 to expand by an average of 4.9% this year and 5% in 2027.
The bank sees Vietnam posting the fastest growth among ASEAN-5 economies, raising its forecast to 8.2% from 7.3% for this year.
It also raised its GDP growth forecast for Indonesia to 5.2% from 5% and kept its outlook for Malaysia at 5.2%.
“Despite differing fiscal policy responses to higher global oil prices, the balance of revisions remains skewed towards growth upgrades rather than downgrades,” OCBC said.
“This supports our view that monetary policy across the region is likely to remain on a tightening path, with further rate hikes expected in the second half of 2026 and first half of 2027,” it added.
If realized, the 3.2% GDP growth will be the Philippines’ worst economic performance since the COVID-19 pandemic in 2020, when it contracted by 9.5% and last year’s post-pandemic low of 4.4%.
Excluding the pandemic, this would be its weakest expansion in 17 years or since the 1.4% in 2009.
“Second-quarter 2026 GDP growth presented a mixed picture across the region,” OCBC said. “Growth strengthened in Vietnam and Malaysia relative to the first quarter of 2026, while Indonesia, the Philippines, and Thailand recorded further moderation.”
Philippine GDP growth eased for a fourth consecutive quarter after settling at 2.3% in the April-to-June period from 2.8% in the first quarter and 5.4% a year ago.
This was the country’s slowest quarterly performance since the 3.8% decline recorded in the first quarter of 2021. Outside the pandemic, it was the weakest in over 16 years or since the 1.8% in the fourth quarter of 2009.
Economy Secretary Arsenio M. Balisacan had said the flood control fallout continued to weigh on public construction and investments, while the energy crisis from the Middle East war strained household spending.
According to Mr. Balisacan, the economy must grow by at least 4.4% in the second half to hit the lower end of the government’s 3.5%-4.5% full-year target; a feat analysts said requires a major turnaround.
For 2027, OCBC sees the Philippine economy recovering to grow by 4.6%, although slightly slower than its previous 4.8% estimate.
This projection means the economy might still be the second-slowest growing in ASEAN-5 next year, trailing Vietnam (8.3%), Indonesia (5%), Malaysia (4.8%). It would only outperform Thailand with 2.5%.
The Development Budget Coordination Committee wants Philippine GDP growth to be between 5% and 6% next year until 2030.
HIKES ON THE TABLE
Despite expectations of tepid growth, OCBC still anticipates the Bangko Sentral ng Pilipinas (BSP) to raise its policy rate by 25 basis points (bps) for a third straight meeting on Thursday.
OCBC’s forecast matches the call of 19 of the 24 analysts and economists polled by BusinessWorld last week. Only five economists penciled in a pause.
If realized, the key policy rate would hit an over one-year high of 5%, bringing the Monetary Board’s total hikes since it began tightening in April to 75 bps.
However, the Singaporean bank is also pricing in two more 25-bp increases to bring the BSP’s benchmark rate to 5.5% by yearend.
OCBC expects the BSP to reverse its policy path and begin easing next year to bring benchmark borrowing costs to 5% by end-2027.
BSP Governor Eli M. Remolona, Jr. has left the door open for further tightening, noting that their inflation fight is still on as they have yet to see a sustained disinflation trend.
However, the “disappointing” second-quarter growth means the central bank can be less aggressive in controlling price pressures, he added.
The BSP has repeatedly signaled its commitment to steering inflation back to its 3% goal using all necessary monetary policy actions, with the headline print averaging 5% as of July.
Its latest projections show inflation could blow past its target for three consecutive years at 6.4% this year, 4.5% in 2027, and 3.1% in 2028.
The Monetary Board has three more rate-setting meetings this year scheduled for Aug. 27, Oct. 22, and Dec. 17. — Katherine K. Chan
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