Philippine economic growth is set to fall short of the government target in 2025, prompting a downward revision of gross domestic product (GDP) projections for the next two years. However, the ₱6.793-trillion 2026 national budget is expected to support a strong economic recovery, the country’s chief economist said.

Speaking at the Presidential Communications Office’s (PCO) press briefing on Monday, Jan. 5, Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio M. Balisacan said the 2026 budget is expected to bolster economic growth to five to six percent this year. Growth is projected to further rise to 5.5 to 6.5 percent in 2027 and six to seven percent in 2028.

To recall, the government, through the Cabinet-level, interagency Development Budget Coordination Committee (DBCC), last year set the Philippines’ annual GDP growth target at six to seven percent for 2026 to 2028.

While the official full-year GDP figure for 2025 has yet to be released, Balisacan said the downward adjustments for 2026 to 2027 reflect the DBCC’s decision made last December. Fourth-quarter and full-year 2025 GDP figures will be reported on Jan. 29. The government targets 5.5- to 6.5-percent growth for 2025, even as Balisacan had already conceded that this is not attainable.

Balisacan stressed that the Philippine economy is expected to grow strongly, particularly in the second half of the year, although some residual effects from last year’s events may still be felt in the first half.

Economic growth slowed to four percent in the third quarter of 2025—the weakest in over 4.5 years—as lingering corruption scandals weighed on the economy.

“We also expect the rebound of consumer confidence this year,” Balisacan said, noting that consumption spending slowed sharply in the third quarter of 2025, dropping from over five percent to just 4.1 percent due to reduced public confidence. “We expect [it] to rebound this year as inflation continues to remain low,” he added.

Balisacan pointed out that in recent years, economic growth has been largely driven by consumption spending, which accounts for nearly three-fourths of GDP on the demand side. On the supply side, services remain the main contributor to the economy.

However, state-run policy think tank Philippine Institute for Development Studies (PIDS) has cautioned that while the services sector has driven much of the country’s growth, it has largely generated jobs in low-productivity, low-wage subsectors.

On inflation, Balisacan said full-year inflation averaged 1.7 percent in 2025 and is expected to remain low this year. “We are targeting just two- to four-percent inflation, but I think we will achieve less than that,” he said, adding that interest rates have been declining and that the Bangko Sentral ng Pilipinas (BSP) has indicated it will continue its rate-cutting trend.

The Philippine Statistics Authority (PSA) will release December inflation data and the full-year 2025 inflation report on Jan. 6.

Balisacan also noted that global trade and investment conditions were not as pessimistic as initially feared last year, despite the surprise spike in United States (US) tariffs. “There are favorable forces that we are seeing moving forward,” he said.