Maybank tips external demand, tourism as emerging growth drivers for the Philippines in 2026
Still, headwinds from US trade policy and political instability remain
[SINGAPORE] The Philippines’ economy may be in for a brighter 2026 as it seeks new economic drivers in external demand and tourism – but there is no shortage of headwinds.
The economy’s third-quarter data suggests that it could be undergoing a structural rebalancing of its growth drivers, Maybank economists said at a press briefing on Tuesday (Jan 20).
Net external demand contributed nearly a percentage point to gross domestic product growth in Q3 2025, following four consecutive quarters of negative or negligible contributions.
The economists said this could indicate a shift in the Philippines’ traditional growth model, which is driven primarily by domestic demand.
“This underscores the economy’s ongoing transformation towards the higher-value services activities,” noted Maybank economist Azril Rosli.
However, he pointed out that such a transformation would also leave the Philippine economy more vulnerable to external shocks.
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“The sustainability of this contribution from net external demand depends on global trade conditions and the Philippines’ competitiveness in the key export sectors, such as electronics and business process outsourcing (BPO) services,” he added.
He identified the semiconductor industry as another export sector that could experience an uplift in 2026, as it moves into a cyclical uptrend.
Still, traditional growth stalwarts are expected to keep anchoring the economy, with household final consumption expenditure accounting for 72.9 per cent of Q3 GDP. The country’s services sector – including its BPO industry – continued to dominate as the largest contributor to expansion.
Maybank economists forecast GDP growth to rise slightly to 4.9 per cent, up from an estimated 4.8 per cent in 2025.
The Philippines’ Q3 expansion took a hit as a corruption scandal over public infrastructure projects – particularly flawed flood-control facilities – weighed on government spending and business sentiment.
Yet, the scandal and the subsequent governance reforms are unlikely to be a persistent drag on public spending and growth in 2026, Azril said.
“In the near term, this could lead to more cautious disbursement and some delays in project roll-out. But this should be seen as a function of timing and oversight, rather than a shift towards austerity.”
He also said that the country’s Asean chairmanship this year could bring a further boost to government spending and foreign domestic investment flows.
As chair, the Philippines’ key priorities include advancing the region’s digital economies and governing the use of artificial intelligence.
Still, downside risks remain: A slowdown in US growth could impact the country’s exports and BPO sectors, while political instability could stall governance reforms.
Remittances to remain strong
Nevertheless, remittances from the Philippines’ overseas foreign workers are expected to remain strong in 2026, amid US economic uncertainty.
These remittances maintained consistent growth during Donald Trump’s first term as US president, and an increasing share of remittances from the Middle East and other parts of Asia is likely to weather headwinds such as tighter immigration policies in the US.
With inflation likely to stay within Bangko Sentral ng Pilipinas’ target range of 2 to 4 per cent, Maybank economists expect the central bank to cut policy rates twice in each half of 2026, to reach 4 per cent.
Bold tourism goals
The economists also noted that the Philippines could gain an uplift from tourism, as the sector gains momentum.
Although tourist arrival volumes have fallen from their pre-pandemic levels, Maybank analyst Ronalyn Lalimo said that each visitor was spending more and staying longer on average.
“Spending intensity is exceptionally strong,” she said, noting that per capita spending had risen fivefold from 5,058 Philippine pesos (S$109) in 2020 to a 26,640 pesos in 2025.
Meanwhile, visitors stayed for an average of 11 nights in 2025, compared with the pre-pandemic average of nine.
The slowdown can be attributed to waning Chinese arrivals, who once made up around 21 per cent of the Philippines’ visitors in 2019. In 2025, they dropped to a share of 4 to 5 per cent.
But a pick-up in domestic tourism could stimulate the industry, which Lalimo estimates will contribute 12 per cent to the country’s household consumption in 2026.
Meanwhile, accompanying infrastructure and supportive policies could fuel tourism as an emerging growth driver in the coming years.
These include increasing airport capacity – which has long suffered from delays and overcrowding – by up to 248 per cent, and the introduction of a value-added tax refund scheme in 2025.
“The cement is being poured,” Lalimo said. “It is time to buy before the cement dries.”
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