Singapore-based Oversea-Chinese Banking Corp. Ltd. (OCBC) sees the Philippine economy as a laggard in the region in terms of domestic demand, forecasting that yearly growth will miss government targets.

According to an OCBC report published on Nov. 19, Philippine gross domestic product (GDP) is projected to expand by 4.8 percent this year, falling short of the already downscaled 5.5- to 6.5-percent target.

OCBC said in an earlier Nov. 17 report that while the outlook for domestic demand is “mixed” across the Association of Southeast Asian Nations (ASEAN)-5, Malaysia and Vietnam are the “standouts,” even as it is clear that the Philippines and Thailand are the “laggards” in the region.

To date, the GDP growth goal for 2025 remains unchanged, a pace that Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio M. Balisacan conceded is nearly impossible to achieve.

OCBC expects output to expand by 5.5 percent in 2026 and stagnate at this rate through 2027. If realized, growth at this pace would fail to meet the lowered yearly targets of six to seven percent from 2026 to 2028.

Growth for the first three quarters averaged five percent, which OCBC describes as “underwhelming.” Growth below six percent would mean the economy falls short of its potential, estimated at up to 6.5 percent.

“Misappropriation of funds for certain projects will likely keep scrutiny over the use of public funds higher than usual, thereby weighing on fiscal disbursements,” OCBC said. For context, tightened spending since the uncovering of flood control corruption cases has negatively impacted business sentiment, consequently slowing growth to its weakest in four and a half years.

It can be recalled that former finance secretary Ralph G. Recto earlier said the “ongoing government anti-corruption drive could slow the country’s economic growth until the first quarter of 2026.”

Household spending grew 4.9 percent year-on-year in the first nine months of 2025, slower than the pre-pandemic average of 5.9 percent. Meanwhile, the labor market showed stability, with unemployment at 3.8 percent as of September.

Since the Bangko Sentral ng Pilipinas (BSP) kicked off its easing cycle, cumulative 1.75 percentage points (ppt) in cuts have helped support household spending, the bank said.

It added that improved inflation management has preserved consumers’ purchasing power.

The Singaporean bank expects inflation to settle at 1.6 percent this year—below the target band of two to four percent. It projects consumer price increases to reach 2.5 percent in 2026 and three percent in 2027, both near the upper half of the band.

Given the “soft domestic demand conditions and the BSP’s continued dovish bias,” OCBC believes the central bank could deliver one more quarter-point cut by year-end to spur growth. This would bring the current key borrowing cost to 4.5 percent before entering 2026.

“The need for further easing into 2026 may be reduced once government spending normalizes following increased scrutiny of public expenditures,” OCBC said.

“Simultaneously, a pause in rate cuts will allow the complete impact of recent rate cuts to be transmitted to the real economy, providing BSP with some room to assess whether there is a need for further easing,” it added.