OECD expects PHL to miss gov’t growth target

THE ECONOMY is likely to fail to hit even the lower end of the government’s 6-8% target this year, the Organisation for Economic Co-operation and Development (OECD) said.

In its Economic Outlook, the OECD projected gross domestic product (GDP) growth of 5.6% this year, against the revised 5.7% growth posted a year earlier.

It also expect Philippine GDP growth to pick up to 6% in 2026, well within the target band.

In the first quarter, the economy grew by a weaker-than-expected 5.4%.

“Private consumption will be bolstered by a strong labor market and low inflation, while investment is projected to pick up modestly on the back of easing financial conditions and increased public infrastructure spending,” the OECD said.

The OECD also sees inflation settling at 2% this year and 3.1% in 2026 “amid balanced domestic demand and currency stability.”

Headline inflation eased to 1.4% in April, the lowest in over five years, amid lower food and fuel prices. This brought average inflation in the first four months to 2%.

The OECD said the risks are “broadly balanced.”

“On the downside, a larger-than-expected slowdown in major economies, including the US or China, could reduce demand for Philippine exports and affect remittance inflows, impacting domestic consumption and investment,” it said.

On the upside, recent reforms to reduce barriers to foreign direct investment could boost investment, the OECD said.

It added that the “sharper-than-expected” global economic slowdown, particularly in the US and China, could cause subdued demand for exports and dent remittances, threatening to dampen consumption and investment.

Private consumption, which accounts for 70% of the economy, is projected to grow 5.7% this year and 6.5% in 2026.

The OECD said below-trend GDP growth and stable inflation expectations gives the Bangko Sentral ng Pilipinas room to continue its easing cycle and eventually lower the policy rate to “a more neutral level” of around 4.75-5% in late 2026.

“Fiscal policy will be slightly restrictive over 2025-26, as the authorities are expected to continue gradual fiscal consolidation to put public debt — currently at around 60% of GDP — on a declining path,” it said. — Aubrey Rose A. Inosante