ADB slashes Philippines’ 2026 growth forecast to 4.4%

By Justine Irish D. Tabile, Senior Reporter

The Asian Development Bank (ADB) slashed its 2026 growth forecast for the Philippines to 4.4%, amid heightened uncertainty from the Middle East war.

In its Asian Development Outlook (ADO) April 2026 report, the Philippine-based multilateral lender cut its Philippine gross domestic product (GDP) growth projection to 4.4%, from its 5.3% forecast in December.

This is below the Philippine government’s 5-6% GDP target range for 2026, but the same pace as last year’s growth. In 2025, the Philippine economy expanded by a weaker-than-expected 4.4%, the slowest in five years or 2020 when GDP contracted by 9.5%.

For 2027, the ADB sees GDP expanding by 5.5%, at the low-end of the government’s 5.5–6.5% target, “based on the assumption that inflationary pressures will ease.”

“We see growth remaining subdued as the country faces strong headwinds from the ongoing Middle East conflict,” said ADB Senior Economics Officer Teresa B. Mendoza in a media briefing on Friday.

“As we know, being heavily dependent on imported oil, the global oil price shock has quickly transmitted to the economy,” she added.

The Philippines is a net importer of oil, and sources most of it from the Middle East, making it extremely vulnerable to price volatility and supply disruptions.

The ADB expects Philippine growth to be mainly fueled by domestic demand and investment, but this may be tempered by rising price pressures.

“Domestic demand will continue to benefit from the lagged effects of monetary easing since 2024, but these gains will be partly offset by recent significant inflationary pressures and heightened uncertainties,” said Ms. Mendoza.

Last month, the Bangko Sentral ng Pilipinas (BSP) kept its benchmark rate unchanged at 4.25% in an off-cycle meeting to calm markets worried over uncertainties arising from the US-Iran war.

In February, the BSP lowered the key rate by 25 basis points (bps) to an over three-year low of 4.25%, bringing total reductions to 225 bps since it began the easing cycle in August 2024.

The ADB expects headline inflation to pick up to 4% this year, higher than its January forecast of 3%, under the baseline scenario. For 2027, the ADB projects headline inflation to ease to 3.5%, within the BSP’s 2-4% target.

The BSP last month raised its inflation forecast for 2026 to 5.1% from 3.6% previously; and for 2027 to 3.8% from 3.2% previously.

“A prolonged conflict, however, can intensify price pressures and drive inflation much higher,” said Ms. Mendoza.

Philippine inflation quickened to a nearly two‑year high of 4.1% in March, breaching the BSP’s 2–4% target amid rising fuel costs.

“Oil price shocks have transmitted rapidly to domestic fuel pump prices, which have now more than doubled,” said Ms. Mendoza. “Higher fuel and transport costs together with rising global prices of food, fertilizer, and other commodities are generating broader inflationary pressures,” she added.

Ms. Mendoza said the peso depreciation is also adding to inflationary pressures as it raises import costs.

The peso closed at an all-time low of P60.748 against the greenback on March 31, only returning to the below-P60 level this week.

However, Ms. Mendoza said the forecasts assume an “early stabilization scenario,” meaning if the war only lasts for two months or until this month.

ADB Country Director for the Philippines Andrew Jeffries said that a prolonged Middle East conflict will “obviously (have) a negative effect on overall GDP growth for the country.”

“Perhaps more important is it’s a much more pronounced negative effect for pockets of the population as opposed to the whole GDP figure for the country as a whole,” he added.

Ms. Mendoza said that another key vulnerability for the Philippines is its remittances. The Middle East accounts for over 17% of total remittances in the Philippines, and a drawn-out conflict could affect overseas Filipino workers and household income, the ADB said.

“In some years, it has proven to be counter-cyclical. More remittances are being sent during crisis,” she said. “But this crisis, if it becomes really prolonged, even remittances can become highly vulnerable.”

The ADB said remittances should recover once conditions in the region improve.

Last year, cash remittances soared to an all-time high of $35.634 billion, accounting for 7.3% of the country’s GDP.

LOAN PROGRAM

Meanwhile, Mr. Jeffries said there is “some uncertainty” around the multilateral lender’s loan program in the Philippines.

“Given this crisis and the fiscal strain that we don’t know how long it will last, that may also affect what they borrow for and what they may need to prioritize and postpone, and so on,” he said.

“It’s just there’s a lot more uncertainty around borrowing generally, including borrowing from ADB now, than, say, a year or two years ago,” he added.

In terms of the regular project pipeline, Mr. Jeffries said that some projects are being re-evaluated. He expects the government to conclude its review by next month.

The Philippines is among the largest recipients of sovereign support from the ADB.

As of December 2024, the ADB has committed public sector loans, grants and technical assistance totaling $36.5 billion, while its current sovereign portfolio in the country includes 25 loans worth $10.2 billion.