[L-R] Mr. Dennis D. Lapid, Officer-in-Charge of the Monetary Policy Sub-Sector at the Bangko Sentral ng Pilipinas; Ms. Wendy Estacio-Cruz, Head of Research at Unicapital Securities, Inc.; Ms. Jemimah Ryla R. Alfonso, Equity Research Analyst, Unicapital Securities, Inc.; and Mr. Peter Louise D. Garnace, Equity Research Analyst, Unicapital Securities, Inc. at Unicapital’s 2026 Start-of-Year Outlook: When The Dust Settles.

Unicapital Securities Inc. has reduced its forecast for the Philippine Stock Exchange’s (PSE) benchmark index, the PSE index (PSEi), to 6,800 from its earlier target of 7,100, citing lingering challenges faced by local equities, led by the impact of a recent corruption scandal and other factors.

In a media briefing on Tuesday, Feb. 24, Unicapital Securities head of research Wendy B. Estacio-Cruz said the lower target remains about 10 percent above the PSEi’s projected close in 2025 and is based on a revised valuation of 10.5 times the price-to-earnings (P/E) ratio of the 30 PSE index stocks, compared with 12 times under the previous 7,100 forecast.

The main reason for the re-rating is the corruption scandal, which continues to slow government infrastructure spending and will “take time to recover and we probably might see some impact on the second half of the year.”

Another factor is monetary policy by the Bangko Sentral ng Pilipinas (BSP), as the brokerage expects a pause following the recent 25-basis-point (bp) rate cut. Estacio-Cruz said, “we’re seeing a pause for at least two more meetings and probably we’ll see another 25-bp rate cut.”

“And then, lastly, is the geopolitical tensions and the US [United States] tariffs,” she said.

Despite these headwinds, the brokerage still sees the Philippine economy reaching a pivotal inflection point, with 2026 shaping up to be a year of recovery and structural reinforcement.

After a period of moderate growth, the Philippine economy is poised for renewed momentum, driven by a pickup in public infrastructure spending, sharper policy execution, and a more accommodative monetary environment.

Unicapital projects gross domestic product (GDP) growth to recover to 5.2 percent in 2026, primarily supported by the resumption of public infrastructure spending and improved policy execution.

In addition, ongoing governance reforms aimed at enhancing transparency are expected to play a crucial role in restoring investor confidence.

“While we’ve faced some moderated growth recently, the underlying macroeconomic foundation remains intact. We are stepping into 2026 at a decisive moment where fiscal support and measured monetary accommodation will reinforce domestic demand,” Estacio-Cruz said.

As inflation remains manageable, this environment gives the BSP some room to support domestic demand.

Dennis D. Lapid, officer-in-charge of the monetary policy sub-sector at the BSP, underscored the regulator’s efforts to ensure appropriate monetary policy settings as part of its continued pursuit of price stability in an evolving environment.

“Our forecasts indicate a slight uptick in inflation this year largely due to supply-side actors. While these price pressures are likely to be temporary, they nonetheless require continued vigilance owing to possible spillover effects,” Lapid said.

Despite global volatility, the Philippines continues to demonstrate relative insulation. Household consumption—accounting for approximately 75 percent of GDP—remains the principal anchor of growth, complemented by steady remittances and resilient business process outsourcing (BPO) revenues.

“Our strategy for 2026 is defensive yet opportunistic. We are prioritizing balance sheet strength and earnings visibility while maintaining selective exposure to structural growth themes. This allows investors to remain resilient while participating in the country’s medium-term recovery,” Estacio-Cruz added.

While maintaining a constructive domestic outlook, Unicapital underscored the need for vigilance amid external risks, including geopolitical tensions, trade imbalances, and shifting global interest rate dynamics. Despite these uncertainties, the firm sees the Philippines entering 2026 with stronger buffers and a more resilient economic foundation, enabling it to manage volatility and sustain its recovery trajectory.

“Greater policy clarity and consistent execution will be key to sustaining market confidence. With infrastructure momentum returning and macroeconomic conditions stabilizing, the Philippines is poised to strengthen its fundamentals and unlock the next phase of long-term growth,” Estacio-Cruz said.