Philippines flagged as 2026 Asia ‘underperformer’

MANILA, Philippines — The Philippines is expected to remain a regional underperformer this year, as sluggish infrastructure spending continues to drag on growth even as the broader Asian economy shows resilience amid local and global uncertainties.

In its latest quarterly report, ANZ Research downgraded its 2026 gross domestic product (GDP) forecast for the Philippines to 4.7 percent from 5 percent, citing seven consecutive months of decline in public infrastructure spending.

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For 2027, however, it maintained its projection at 5.6 percent.

If the 2026 print is realized, this would mark another sub-5 percent growth outturn following the country’s disappointing 4.4-percent expansion last year.

Infra spending

“We expect the Philippines to remain the underperformer in the region, similar to the pattern in the previous two quarters. The deceleration in public infrastructure spending has permeated through household confidence and corporate investment plans,” ANZ said, noting that the timing and extent of spending revival is still not seen.

Infrastructure spending data from the Department of Budget and Management is yet to be updated, with the latest disbursement report still dated November 2025 as of this writing.

However, cash allocation utilization data as of end-2025 showed that the Department of Public Works and Highways (DPWH) posted the largest amount of unused funds at P30.36 billion—more than double that of the next highest agency.

For 2026, allotment releases also indicate slow spending, with the DPWH receiving only 12 percent of its budget as of the end of February, the lowest among executive departments.

While ANZ noted that subdued growth conditions may still warrant further interest rate cuts, it emphasized that monetary easing alone would be insufficient to lift the economy.

“The appropriate remedy is a resumption of public infrastructure spending, the outlook for which is unclear,” it said.

On the consumption side, the Philippines stands out as an exception to the broader regional trend of improving household spending. According to ANZ, the composition of credit suggests underlying strain rather than confidence.

Credit

“The Philippines is the only exception to this pattern, but the bias of credit towards salary loans and credit card receivables suggests a degree of stress in the household sector rather than optimism on economic prospects,” ANZ said.

ANZ’s baseline projections assume that the war in the Middle East — which has since rippled across global energy markets — will not be prolonged.

As such, should the war drag on, this outlook may even deteriorate further, especially as the Philippines imports about 98 percent of its crude oil from the Middle East. The Marcos administration’s economic team had already signaled that growth may again fall below the government’s 5 to 6 percent target this year.

This only further highlights the Philippines’ lag, as ANZ said the rest of Asia is now in a stronger position to weather oil price shocks than during the Russia-Ukraine war, when price pressures were more broad-based.