The Marcos Jr. administration’s fiscal consolidation efforts following the flood-control fiasco are expected to slow government spending and cap investment outlays in the coming months, weighing on economic growth in both 2025 and 2026.

Singapore-based Oversea-Chinese Banking Corp. Ltd. (OCBC), in its December 2025 research monitor published on Dec. 2, said it anticipates the country’s gross domestic product (GDP) to expand 4.8 percent this year and 5.5 percent next year—far below this year’s growth target of at least 5.5 percent and next year’s goal of at least six percent.

“Economic growth is likely be impacted in the coming quarters due to a series of public construction scandals,” OCBC said.

Additionally, OCBC said “government spending will slow due to normalization and the fiscal consolidation agenda of the President Ferdinand Marcos Jr. administration.”

The latest Department of Budget and Management (DBM) data showed that the national government’s (NG) total disbursements expanded by 5.2 percent to ₱4.48 trillion as of end-September from ₱4.26 trillion a year ago, but this still fell short of the ₱4.64-trillion program for the nine-month period.

Meanwhile, OCBC sees household consumption remaining steady in 2026 compared to this year’s levels.

“On inflation, lower global energy prices and correspondingly modest electricity tariff adjustments will help keep utility prices in check in 2026,” OCBC said. Inflation averaged 1.7 percent as of end-October, below the lower end of the target band of two to four percent.

OCBC forecasts annual consumer price increases to settle at 1.6 percent this year and to clock in at a within-target 2.5 percent in 2026.

Citing still-subdued inflation and expectations of slower GDP expansion, OCBC believes the Bangko Sentral ng Pilipinas (BSP) will deliver another quarter-point reduction in the key interest rate, bringing it down to 4.5 percent by year-end.

To date, key borrowing costs have been reduced by a cumulative 1.75 percentage points (ppt) since the BSP kicked off its inflation-targeting easing cycle in August last year.

It can be recalled that the Philippine peso slumped in recent months following the central bank’s unexpected interest-rate cut in October to 4.75 percent, an easing largely attributed to the unearthing of irregularities in flood-control funds and moderating economic growth.

Among Asian currencies excluding the Japanese yen, OCBC believes there is room for the Malaysian ringgit and Chinese renminbi to outperform, while the peso and Indonesian rupiah are seen lagging their regional peers, the bank said in its foreign exchange (FX) and rates outlook for the first half of 2026, also published on Dec. 2.

OCBC noted that the peso, alongside the rupiah and Indian rupee, “underperformed” in the second half of the year as it bore the brunt of the continued slowdown in output expansion. The BSP’s dovish tone has also contributed to the local currency’s depreciation during the period.

The bank pointed out that domestic drags resulted in a softer peso amid the currency’s bearish positioning.

The peso first plunged to an all-time low of ₱59.13 against the United States (US) dollar on Oct. 28, a level breached again on Nov. 12 when it hit its current weakest-ever point of ₱59.17 per dollar.

OCBC expects the local currency to gradually appreciate to a stronger ₱58:$1 level versus the greenback, projecting it to end 2025 at ₱58.3.

The bank projected the peso to strengthen further to ₱58.1 in the first quarter of 2026; ₱57.9 in the second quarter; ₱57.4 in the third quarter; and ₱57.2 in the fourth quarter of next year.