How should we view 2026? Is the glass half full or half empty? Data suggests that while 2026 will not be a year of dramatic growth, it will be a period of repositioning, recalibration, and resilience.

Last week, the PNB Policy Committee, chaired by Atty. Ebot Tan, had the opportunity to listen to David Leechiu of Leechiu Property Consultants as he presented his real estate outlook. Here are some of the highlights:

On the Office sector, he noted a steady recovery driven by continuous take-up from IT-BPMs. While Metro Manila’s vacancy rate is currently high at 18 percent, it is projected to hit single digits by 2029. The Residential Market remains soft; Metro Manila demand hit a six-year low, with current inventory expected to be cleared in 3.5 years. However, luxury condos remain resilient and residential prices stay firm.

Regarding Hotels and Tourism, demand is stable despite moderate foreign arrivals, thanks to higher-spending domestic travelers. Over 46,000 keys will open over the next five years, with 87 percent located in airport-connected destinations—highlighting accessibility as a key driver. On Retail, mall growth continues with 108 new malls in the pipeline, adding to the current 545. Finally, the emergence of the Philippines as a Data Center hub reinforces the country’s relevance in the digital economy.

The BPO industry remains one of the country’s most compelling success stories, growing from 1,000 workers in the year 2000 to 1.9 million in 2025. IBPAP President Jack Madrid noted that the industry generated $40 billion in export revenues, contributing about eight percent of GDP. This is expected to grow to $42 billion with 1.97 million jobs in 2026. Jack emphasized that “the environment remains uncertain as technology transformation accelerates.” He added: “Competitiveness will be defined by leadership depth, domain capability, and the ability to adapt at speed. Capability, mindset, and execution will determine how far we go.”

On the macroeconomic front, Alvin Arogo, Chief Economist and Head of PNB Research, shared that the Philippine economy slowed more than expected in 2025. GDP growth is now estimated at 4.5 percent, lower than the earlier forecast of 5.4 percent. This was largely due to the impact of corruption probes on flood control projects, which disrupted public construction and weakened confidence. In the third quarter, GDP grew by 4.0 percent, a notable slowdown from 5.5 percent in Q2. Public construction fell sharply by 26.2 percent, pulling down capital formation. Household consumption, which accounts for nearly three-fourths of GDP, expanded by only 4.1 percemt—its weakest pace in over four years. Strong exports, up 7.0 percent due to front-loading ahead of US tariff risks, helped prevent an even steeper decline.

Despite these challenges, the economy remains above pre-pandemic levels, with cumulative output nearly 19 percent higher than in 2019. Certain sectors outperformed, including health services (+12.2 percent) and education (+6.8 percent), while construction and manufacturing posted minimal gains.

Inflation was a bright spot. The rate of increase in the Consumer Price Index (CPI) averaged 1.7 percent in 2025, well below the Bangko Sentral ng Pilipinas (BSP) target range of two percent to four percent and down from 3.2 percent in 2024. PNB Research expects a temporary rise in 2026 due to wage adjustments, utility rate changes, and rice import restrictions.

Monetary policy turned more accommodative. The BSP reduced its policy rate by 125 basis points during the year, bringing the Target RRP to 4.50 percent. One more adjustment to 4.25 percent is expected early in 2026, after which the central bank is likely to maintain a steady stance. However, further downward adjustments are possible if economic growth and inflation turn out weaker than expected.

Looking ahead, PNB Research forecasts GDP growth of 4.0 percent in 2026, reflecting continued weakness in public construction until late in the year. Household spending should improve modestly to 4.8 percent, supported by wage gains and easing inflation. Private construction and durable equipment investment are expected to provide some lift, though not enough to offset subdued government spending.

External trade remains a concern, projected to contract by 1.8 percent as US tariffs take effect, while imports are likely to stay flat—signaling soft domestic demand. The trade deficit is expected to remain near -10.4 percent of GDP. Inflation should normalize to 3.3 percent, within the BSP’s comfort zone. This outlook supports a cautious monetary stance focused on stability rather than further easing.

There are undeniably risks, but there is also reason for cautious optimism. If reforms are pursued decisively, accountability upheld, and investments channeled effectively, 2026 can mark a turning point. With inflation within target, interest rates stabilizing, and the potential resumption of public spending once uncertainties clear, the conditions for recovery are aligning. Confidence, once restored, can be a powerful multiplier.

For 2026, growth prospects are expected to remain modest, with confidence-building and infrastructure acceleration acting as the keys to unlocking a more robust rebound. Let’s look at the glass as half full, with room to grow. Let’s pray that discipline, integrity, and execution convert today’s resilience into tomorrow’s momentum. Wishing everyone abundant blessings in 2026!