By Katherine K. Chan, Reporter
THE PHILIPPINES could be Southeast Asia’s fourth slowest-growing economy this year despite limited spillovers from the Middle East conflict, as its heavy reliance on imported oil and weak investment climate continue to weigh on growth, the ASEAN+3 Macroeconomic Research Office (AMRO) said.
In its latest ASEAN+3 Regional Economic Outlook, AMRO kept its Philippine gross domestic product (GDP) growth projections unchanged at 4.1% this year and 5.5% in 2027.
Both forecasts are still within the National Government’s growth targets of 3.5%-4.5% for 2026 and 5%-6% for 2027.
“The Philippines is one of the countries in the region that has been harder hit by the oil shock so far,” AMRO Chief Economist Dong He said in a virtual news briefing on Monday. “That’s reflected in both the lower growth rates we forecast for the Philippines this year than last year, but also the significantly higher inflation than 2025.”
If realized, Philippine economic growth this year will even be slower than the post-pandemic low of 4.4% in 2025. Energy shocks from the Middle East war rippled through the country’s domestic economy rapidly, dragging its GDP growth to 2.8% in the first quarter.
For this year, AMRO’s growth forecast for the Philippines is the fourth weakest among the Association of Southeast Asian Nations (ASEAN), ahead only of Brunei (1.9%), Thailand (2.4%) and Myanmar (2.5%). The Philippines is expected to trail Vietnam (7.5%), Indonesia (5%), Malaysia (5%), Cambodia (4.9%), Singapore (4.8%), and Laos (4.6%).
Mr. He said he is “cautiously optimistic” on the Philippines as the expected boost from artificial intelligence (AI) provides the economy some relief.
“Overall, I think the Philippine economy is benefiting from the AI cycle, but it has some specifics in terms of its oil exposures to the Middle East. It’s probably a lack of strategic reserves in terms of oil supply that’s reflected in these numbers,” he said.
For 2027, AMRO expects the Philippines to be the second fastest-growing economy in ASEAN, behind Vietnam (7.3%), and ahead of Indonesia (5.1%), Cambodia (4.9%), Laos and Malaysia (4.7%), Singapore (3.1%), Myanmar and Thailand (2.5%), and Brunei (1.7%).
According to Mr. He, the country’s investment slump, particularly in infrastructure, will continue to affect domestic activity throughout the year. For the long term, he said the Philippine government should focus on resolving key issues to attract more investments.
“That is how to strengthen private investment so that the production capacity and the infrastructure will be strong enough to support higher medium-term growth in terms of dealing with, for example, extreme weather conditions to make the Philippine economy much more robust against these natural disasters. So, some of the governance issues relating to infrastructure investment will have to be resolved,” he added.
The AI boom will also continue to propel the economy, given the country’s significant semiconductor exports, according to AMRO.
“On the growth front, it continues to benefit from the AI cycle. Actually… we think that the Philippines is very much a service-based export economy. It is very much plugged into the global AI cycle as well… (Semiconductor exports) would continue to provide support to the export growth in the Philippines,” Mr. He said.
Meanwhile, Mr. He noted that the impact of the Middle East war on the rest of the region was likewise less severe than initially expected due to strong domestic demand.
For ASEAN — or the Philippines, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, Timor-Leste, and Vietnam — AMRO hiked its 2026 growth forecast to 4.8% from 4.6% previously but kept it 4.8% for 2027.
Including China, Hong Kong, Japan, and South Korea (ASEAN+3), the region is seen to expand slightly faster at 4.1% by yearend from 4% as of last month, before moderating to 4% in 2027.
SLOWER INFLATION
Meanwhile, AMRO also noted that Philippine inflation this year could be slower than earlier anticipated but may still be the third fastest in ASEAN.
AMRO cut its Philippine inflation forecast for 2026 to 5.7% from 6% previously but kept it at 4.1% for 2027.
If realized, inflation this year will sharply accelerate from the 1.7% last year, marking the hottest clip in three years or since the 6% in 2023.
“As you know, the pass-through from energy prices to consumer prices in the Philippines was quite fast and that to some extent reflected the limited fiscal measures that the government took,” Mr. He said.
The AMRO economist noted that the lower inflation forecast came as their base scenario sees global oil price easing to around $80 a barrel this year and $70 next year from the over $100-per-barrel peak at the height of the war.
Both inflation projections would also put the headline print well above the Bangko Sentral ng Pilipinas’ (BSP) 3% target for two straight years, but below its 6.4% estimate for 2026 and 4.5% for 2027.
It would also be the third-fastest inflation among ASEAN+3 members this year, after Myanmar with 20% and Laos with 8.1%.
For ASEAN, AMRO lowered its average inflation estimate to 3.6% from 4% for 2026 and to 3.1% from 3.2% for 2027. For ASEAN+3, inflation is expected to average 1.6% for both years.
However, Mr. He noted that the BSP’s preemptive monetary policy tightening prevented price pressures in the country from broadening further.
Last month, the Monetary Board tightened for a second straight meeting, raising the key policy rate by 25 basis points to 4.75% as elevated oil prices continued to feed into the costs of other commodities.
BSP Governor Eli M. Remolona, Jr. left the door open to another 25-bp hike as the central bank cited still strong inflationary pressures, adding that the economy will likely recover by the second half of the year.
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