HSBC Says the Philippine Economy Will Grow More Slowly
HSBC has lowered its growth predictions for the Philippine economy because there are a lot of worries about corruption in public works spending. The bank has changed its mind about how much the economy will grow in 2025. It now thinks it will grow by an average of 4.7% instead of 5.4%. The new prediction is lower than the government’s already lowered goal of 5.5%–6.5%.
According to Aris Dacanay, HSBC’s ASEAN economist, stricter oversight and institutional reforms are making it take longer to give out money for big infrastructure projects. He went on to say that while improvements in transparency are good for the long term, they are making things harder in the short term. Dacanay said during a briefing in Taguig City, “Meeting current growth targets will be a tall order.”
Source: LinkedIn
Corruption Concerns Impact Infrastructure Projects
The downgrade comes at a time when the government is being looked into for possible problems with its ₱545 billion flood control budget. Earlier, President Ferdinand Marcos Jr. said that only 15 contractors would get 20% of the money. Since then, lawmakers have started official investigations into possible misuse of public money.
HSBC’s analysis shows that the slowdown in project approvals could last until 2026. Economists think that uncertainty will make it harder for the government to carry out its “Build Better More” infrastructure plan and will stop people from investing more. Analysts say that a slowdown in construction could slow down overall productivity growth.
Decline in Public Works Spending Puts Jobs at Risk
According to government data, spending on infrastructure fell by 40% in October 2025, the biggest drop since the pandemic. Dacanay said that this downturn could cause GDP growth in the fourth quarter to drop below 4%, which would lower the annual average. The contraction also puts about 4.5 million jobs in the construction industry at risk.
Dacanay does not expect a lot of layoffs, but he did say that uncertainty could make families spend less. He said, “Families may save more instead of spending or investing.” Construction, which employs about 10% of the workforce, is slowing down. This could have an effect on related fields like manufacturing and logistics.
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Government Admits It’s Hard to Reach Growth Goals
Arsenio Balisacan, the Secretary of Economic Planning, said that it is “very unlikely” that the lowered growth goal will be met. He said that the problems were caused by both delayed spending on infrastructure and problems with the global economy. Policymakers are also keeping an eye on whether the slowdown in government spending will hurt private consumption.
Dacanay stressed that cutting government spending often hurts domestic demand, especially when businesses become cautious. He said that consumer confidence might stay weak until early 2026. Policymakers will have a hard time restoring trust without hurting their efforts to fight corruption.
2026 Outlook Also Revised Downward
HSBC also lowered its 2026 forecast from 5.8% to 5.2%, which is still below the government’s target range of 5.5% to 6.5%. The bank said that slower spending by households and weaker construction activity were the main reasons for the slowdown. Less money spent on big projects is likely to lead to less demand for construction materials from other countries.
Dacanay thinks that growth could stabilize by the end of 2026, even though there are some problems. This is if reforms lead to better fiscal discipline. He said, “Confidence will probably come back in the second half.” The bank thinks that things will slowly get better once due diligence processes get better and infrastructure funding starts up again.
Consumption Growth Seen Slowing Despite Wage Gains
Household spending, which is a big part of the Philippine economy, is expected to grow more slowly this year, even though wages are going up. Dacanay said that families who are worried about losing their jobs might not spend as much, which could offset income gains. He noted that “Households will buy more local goods but fewer goods overall.”
This change in behavior could help close the country’s current account deficit by lowering demand for imports. Analysts also think that a weaker peso may make people more likely to buy things made in Mexico. But the combination of slower demand and fiscal restraint will probably make it harder for the economy to grow in the near future.
Central Bank Expected to Cut Rates in February
On February 19, HSBC thinks the Bangko Sentral ng Pilipinas will cut its policy rate for the first time in 2026. Dacanay says that the reverse repurchase rate will drop by 25 basis points, bringing it down to 4.25%. If this happens, it would be the lowest rate level since 2022.
The U.S. Federal Reserve’s policy direction will have some bearing on the decision. If the Fed signals deeper cuts, the BSP might do the same thing to keep the economy stable. Dacanay said that a looser monetary policy could help lessen the slowdown, but it might take a few quarters for the effects to show up.
Balancing Reform and Recovery
HSBC said that anti-corruption reforms are still important for long-term growth, even though they know that growth will slow down in the near future. Dacanay called the process a “necessary correction” that could boost investor confidence once it is carried out correctly. Bringing back responsibility for public spending will be important for improving infrastructure and making the economy more competitive in the long run.
The Philippines has to keep up the pace of reform while also protecting jobs and consumption. Economists say that to keep things stable, we will need to work together on fiscal and monetary policy. For now, it looks like growth will slow down because the country is changing its focus to being more open and having stricter rules.
