MANILA, Philippines — The Philippines may post its weakest growth in nearly two decades this year, outside of the Covid-19 pandemic, as high inflation bites the economy where it hurts the most: consumer spending.
Gross domestic product (GDP) is projected to expand 3.4 percent in 2026 from a year earlier, officials of the Asean+3 Macroeconomic Research Office (Amro) said on Thursday after completing their annual consultation visit to the Philippines.
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That was lower than Amro’s previous estimate of 4.1 percent back in July. Excluding the pandemic-led meltdown in 2020, the revised forecast would mark the slowest pace of expansion since 2009—back when the onslaught of typhoons and the aftermath of the global financial crisis dragged GDP growth to just 1.4 percent.
The updated projection also suggested that the Marcos administration may miss its watered-down growth target of 3.5 percent to 4.5 percent for this year. The Philippines, a net energy importer, has been among the economies in the region hardest hit by the global oil shock stemming from the conflict in the Middle East, Amro said.
Inflation is expected to rise sharply to 5.4 percent in 2026 from 1.7 percent in 2025, before moderating to 3.8 percent in 2027, Amro said. This, in turn, could weigh on household spending, which historically accounts for about 70 percent of GDP.
“Growth this year will be weighed down by weaker private consumption amid higher inflation and subdued investment, although a gradual recovery in public construction in the second half of the year and resilient exports should provide some support,” said Jinho Choi, lead economist and head of the Amro visiting team.
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The slowdown was already evident in the first quarter, when the economy expanded just 2.8 percent from a year earlier. Growth was weighed down by the fallout from the Middle East conflict, which hit an economy still recovering from a confidence shock linked to a major corruption scandal.
Amro said growth may rebound to 4.8 percent next year. But this was a less bullish outlook than the group’s previous estimate of 5.5 percent.
Looking ahead, Amro said the policy mix should balance the need to contain inflation with support for economic growth.
“Fiscal policy should remain responsive to cyclical downturns by restoring well-governed infrastructure investment, while maintaining a firm commitment to medium-term fiscal consolidation,” it said.
“Monetary policy should remain data-dependent. Further rate hikes would be warranted if core inflation remains elevated and persistent or inflation expectations show signs of becoming de-anchored,” it added. INQ