The economy is ending 2025 on an upswing driven again by holiday spending and strong Overseas Filipino Workers (OFW) remittances but definitely with a slower-than-expected growth rate below the government’s target of 5.5% to 6.5%. S&P Global set it at 4.8% on the basis of the temporary reduction in public infrastructure spending, while private local economic institutions like UA&P and the World Bank are placing it at 5.1% and 5.3%, respectively.  

The general outlook for 2026 is more optimistic albeit cautious. Public spending is expected to accelerate while inflation is expected to stay low during the year and global conditions stabilize. Gross Domestic Product (GDP) growth is seen to accelerate to around 6.2%.

While estimates are still mixed with some analysts even predicting further weakness, the Philippine peso may maintain its parity with the US dollar in the high 50s but just below 60 following an expected rebound in government spending that could boost investor confidence and buttressed by the continuing heavy inflow of OFW remittances. 

Market sectors expected to outperform

Again, growth in 2026 is expected to be primarily driven by strong domestic consumption, bolstered by low inflation estimated at around 3% for 2026, rising employment, and strong remittance inflows from OFWs. This will result in volume of growth in the sector dealing in food, retail, and consumer staples.  

The financials, especially banking, are next. Continued economic expansion will fuel sustained credit demand from both corporate and consumer segments. Moreover, stable monetary policy and favorable interest rate conditions are expected to allow major banks to sustain strong earnings growth.

Expected to also do well is infrastructure and construction. The government has committed to maintain high infrastructure spending, targeting 5% to 6% of GDP over the medium term. This sector is projected to register a significant annual growth rate, estimated at over 7% all the way through 2029 as big-ticket public-private partnership (PPP) projects, including railways, ports, and bridges, move forward.

Then come the Real Estate Investment Trusts or REITs. The REIT sector benefits from stable cash flows generated by properties used for infrastructure and logistics. They will continue to provide attractive dividend yields to investors.

Considering that there is a serious domestic shift in government policy toward sustainable and critical energy sources – in keeping with the global trend – the energy and renewable resources sector is also poised to become key investment growth areas for the year and onwards.  

The sector will be heavily supported by local investment facilitation boards. This will encourage companies focused on solar, wind, and geothermal power to expand rapidly to both meet the rising clean energy demand and need to transition away from fossil fuels.

Mining and extraction may find traction at this time, too. Continued global demand for critical minerals and industrial metals is expected to increase and keep the mining and extraction sector robust, especially with government reforms aimed at boosting the industry.

Finally, the services sector is also estimated to play a key role in catering to long-term global trends at the same time remain as the largest component of the economy, accounting for about 61.5% of GDP.  

Together with the entry of Artificial Intelligence (AI) infrastructure, the Information Technology and Business Process Outsourcing (IT-BPO) sector is expected to sustain growth, adapting to global demand trends, including those related to electronics and semiconductors. Global demand for AI-related electronic products is expected to boost merchandise trade, directly benefiting the Philippines’ substantial electronics assembly and export industry.

First MetroSec’s playbook

First MetroSec’s head analyst Mark Angeles and assistant colleague Estella Dhel Villamiel, who were responsible for the production of the recommendations, premised their stockbrokerage house’s strategy and game plan referencing Robert Frost’s 1915 poem “The Road Not Taken.”  

Angeles and Villamiel see the market standing in some crossroads and is set to take what it calls as the familiar muddle-through path that is lined with caution spilling over into the next 12 months. 

For 2026, the index target range is placed between 5,500 to 7,500, with a base case of 6,500, driven by an earnings per share (EPS) growth of +5% compound annual growth rate (CAGR) rather than by valuation expansion. Risk premium is assumed to remain elevated at 600bps, near +2SD above the technical historical mean of the market considering the lingering confidence concerns, in general. 

If the above explanation was confusing than enlightening, just remember that First MetroSec is estimating that the market may hit the high of 7,500 of the market’s main index (which is the Philippine Stock Exchange index or PSEi) or fall as low to 5,500 in 2026 but is confident to see it thread at 6,500 on the basis of an EPS growth estimate of +5% CAGR rather than by market valuation performance.

What is important, according to Angeles, “much of the valuation damage is already priced in, which should limit downside risk.”

Factors that could steer the market upwards include governance reforms and normalization of public spending, macro stability with GDP growth returning to trend, and renewed foreign fund inflows.

Stocks endorsed to play with

Source: First Metro Securities, Refinitiv Closing price as of 27 November 2025

In summary, Angeles and Villamiel of First MetroSec reiterate their barbell strategy, wherein “One foot remains on the familiar road with dividend plays and defensives for cashflow/earnings visibility, while the other steps onto the road less travelled with large-cap cyclicals positioned for economic and confidence recovery.”

Also, they advocate “an unmarked trail with AI diffusion as an emerging structural theme, favoring sectors with high operating leverage.” – Rappler.com

(The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise.  Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity.   You may reach the writer at densomera@yahoo.com)