‘Return to 6% growth a struggle for Philippine economy’

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November 5, 2026 | 12:00am

MANILA, Philippines —  The Philippine economy may struggle to return to the six-percent growth pace seen before the pandemic, with Moody’s Ratings estimating its medium-term growth potential at around 5.5 percent unless investment and business confidence improve.

During the launch event of Moody’s strategic investment in PhilRatings yesterday, Moody’s assistant vice president for sovereign risk Young Kim said the economy would continue to draw support from favorable demographics, resilient services exports and an eventual recovery in investment.

“Having said that, we do note that the broader near-term growth will not return to the six percent (level),” Kim said.

In a subsequent interview with The STAR, Kim clarified that Moody’s assessment was more about the Philippines’ medium-term growth prospects rather than year-to-year fluctuations.

“We have it at around 5.5 percent, give or take,” Kim said when asked for Moody’s estimate of the country’s potential growth rate.

Potential growth refers to the rate at which an economy can sustainably expand over time without creating excessive inflation or other imbalances.

Kim said the estimate is below the roughly six-percent growth the Philippines was accustomed to before the pandemic partly because of the country’s vulnerability to recurring natural disasters and physical climate risks.

Actual growth is also expected to remain well below that potential this year, with Moody’s forecasting gross domestic product (GDP) expansion of 3.3 percent in 2026 before a recovery to 5.1 percent in 2027 as public investment gradually normalizes and external pressures ease.

Kim said a return toward the six-percent level would depend heavily on restoring confidence and generating a stronger pickup in investment.

He noted that infrastructure spending could help crowd in private capital, while public-private partnerships, flagship infrastructure projects and reforms to improve connectivity and ease of doing business could support investment and productivity.

“If confidence recovers quickly enough, external pressures ease considerably next year, and if we do see a credible pickup in both public and private investment… that leads to broader productivity gains in the sector and helps unlock further growth potential,” Kim said.

During a panel discussion, Kim said public investment would remain an important driver of the recovery, although spending was unlikely to return to levels exceeding five percent of GDP.

He said this increases the importance of public-private partnerships and private sector participation, particularly as reforms enacted in recent years begin translating into actual investment.

Moody’s sees opportunities in renewable energy, digital infrastructure, logistics and manufacturing, although Kim said the strength of the recovery would depend on how quickly public spending could catalyze wider private investment.

Kim also warned that further delays in public investment could force Moody’s to revisit its 5.1-percent growth forecast for next year.

“If we do see a much more delay on public investment next year, obviously, we would need to revise our growth assumptions,” he said.

He added that continued energy-market volatility and El Niño could also affect agricultural production and inflation next year.