The Philippine economy is expected to experience a sharper slowdown in the early months of 2026, with growth gradually picking up as the year progresses, according to economists from De La Salle University (DLSU).

In DLSU’s report of the Philippine economy for February 2026, published this week, economists Jesus Felipe, Mariel Monica Sauler, Gerome Vedeja, and Seth Paolo Paden projected gross domestic product (GDP) growth at 2.5 percent in the first quarter, before gradually rising to 3.8 percent in the second quarter, 4.5 percent in the third quarter, and 5.9 percent in the fourth quarter.

For the full year, the economists forecast GDP expansion of 4.19 percent, accelerating to 5.34 percent in 2027 and stabilizing at 5.3 percent in 2028.

“The outlook for 2026 is muted,” they said. “This outlook suggests a relatively steady economic recovery as the year progresses.”

“Despite this gradual recovery, the government’s official growth targets will likely remain elusive,” DLSU economists noted, referring to the already downscaled five to six percent for 2026 and 5.5 to 6.5 percent for 2027, and the retained six to seven percent for 2028.

DLSU economists stressed that the Philippine economy’s potential growth—the rate allowed by underlying technical conditions—is around six percent and no higher. This assessment echoes Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio M. Balisacan, who earlier said achieving this level of growth would require good governance and sound economic management.

Balisacan, the country’s chief economist, has emphasized the importance of maintaining strong economic fundamentals. “We must not be distracted by political noise. Otherwise, you sacrifice sound fundamentals for short-term gains, and that’s not good for long-term growth,” he said last month.

While higher actual growth may be achievable for a year or two, it would eventually revert to the economy’s potential, DLSU’s report noted. Sustained higher growth, the economists added, requires structural changes in the economy.

“It is possible that weaker actual growth is pulling down the economy’s potential growth,” DLSU economists warned. “The economy is still weighed down by declining confidence and a sharp contraction in investment.”

On inflation, DLSU economists forecast a continued upward trend, following a full-year rate of 1.7 percent in 2025—the lowest in nine years, or since 2016 when it stood at 1.3 percent.

Their projections indicate that inflation will continue to rise throughout the year, averaging 3.1 percent in 2026. This is nearly double the 1.7 percent recorded in 2025 and close to the 3.2-percent average seen in 2024. The forecast consumer price increase remains within the government’s target range of two to four percent.

The DLSU economists’ forecasts come after a sharp slowdown in 2025, when the Philippine economy expanded below target.

According to the Philippine Statistics Authority (PSA), GDP growth slowed to 4.4 percent—the weakest full-year expansion in nine years and the lowest since the peak of Covid-19 lockdowns—following stalled public and private investments linked to a billion-peso flood-control corruption scandal.

The 2025 shortfall marked the third consecutive year that the Marcos Jr. administration missed its annual growth targets, falling short of the government’s downgraded 5.5- to 6.5-percent goal.