Weak consumption, delayed investments to drag Philippine growth — ADB

By Justine Irish D. Tabile, Senior Reporter

THE ASIAN Development Bank (ADB) cut its growth forecasts for the Philippines for this year and next year, citing delayed investments and weaker household consumption.

In its Asian Development Outlook July 2026 report, the Philippine-based multilateral lender lowered its Philippine gross domestic product (GDP) growth forecast to 3.8% from the 4.4% previously.

The latest forecast is within the Philippine government’s recently revised 3.5-4.5% GDP target for 2026, but is slower than the 4.4% growth posted in 2025.

The ADB also trimmed its 2027 growth forecast to 5.3% from 5.5% previously, placing it at the lower end of the government’s revised 5-6% target.

“The Philippines saw a downward adjustment in growth projections due to delayed investments, softer private consumption amid higher commodity prices and climate-related risks,” the ADB said in the report released on Wednesday.

In the first quarter, the Philippine economy unexpectedly grew by 2.8%, its weakest growth since the coronavirus pandemic, due to spiraling oil prices due to the Middle East war and the lingering effects of last year’s corruption scandal.

The ADB’s 2026 growth forecast for the Philippines is also below its revised 4.6% outlook for developing Southeast Asia, which was trimmed from 4.7% previously.

“The 2026 forecast for developing Southeast Asia is trimmed following downward revisions for Cambodia and the Philippines as higher energy prices weigh on domestic demand and tourism,” the multilateral lender said.

Based on ADB’s 2026 projections, the Philippines’ growth will be the fourth slowest in Southeast Asia, tied with Timor-Leste at 3.8%, and ahead of Myanmar (2.4%), Brunei Darussalam (1.8%), and Thailand (1.8%).

The Philippines is expected to trail Vietnam (7.2%), Indonesia (5.2%), Malaysia (4.6%), Cambodia (4.1%), and Laos (4%)

For 2027, the Philippines is expected to post the second-fastest growth in developing Asia, after Vietnam (7%).

The Philippines’ heavy reliance on Middle Eastern oil imports has left the economy particularly exposed to the global oil shock that began in March.

The ADB raised its Philippine headline inflation forecast to 5.9% this year from 4% previously. This is well above the Bangko Sentral ng Pilipinas’ (BSP) 2-4% tolerance range but below the central bank’s inflation projection of 6.4%.

For 2027, the ADB hiked its headline inflation forecast to 3.9% from 3.5% previously. This is at the upper end of the BSP’s 2-4% tolerance range but below  its 4.5% projection.

Also, the ADB has raised its inflation forecasts for developing Southeast Asia to 3.9% this year from 3.2% previously, and 2.9% for 2027 from 2.8% previously.

“The upward revisions reflect higher global energy and food prices linked to the Middle East crisis, as well as exchange rate pressures that have raised import costs across the subregion,” it said, citing that the largest upward revisions were recorded for the Philippines.

The ADB said disruptions in energy markets have pushed up fertilizer costs, leaving developing Asia and the Pacific economies with low fertilizer self-sufficiency vulnerable to price volatility and supply-chain disruptions.

“Absent policy intervention, rice production could fall sharply in 2026, especially in economies reliant on imported fertilizer. The effect is best measured against the no-shock, business-as-usual scenario, under which output was otherwise projected to grow,” it added.

The ADB said Philippine rice output could decline by 14% this year under the most severe scenario where crude oil prices rise 75% above the baseline assumption of $69 per barrel. Under the same scenario, farmgate prices could rise by as much as 20%.

ADB SUPPORT
Meanwhile, ADB Philippines Country Director Andrew Jeffries said the Philippines’ recent reclassification as an upper-middle income economy is unlikely to alter the multilateral lender’s support in the near term.

“There are no immediate implications for ADB financing, or other forms of support including technical assistance, because of the Philippines’ recent classification as an upper-middle income economy,” he told BusinessWorld.

“ADB will continue to support the government’s development priorities, as well as the reforms and investments needed to build on and sustain this achievement,” he added.

His remarks came after the World Bank reclassified the Philippines as an upper-middle income country after its gross national income per capita rose to $4,850 from $4,470 last year.

While no immediate changes are expected, Mr. Jeffries said the ADB’s sovereign lending terms could change if the Philippines remains above the upper-middle income threshold for three consecutive years.

“ADB will continuously align its engagement to respond to the Philippines’ transition needs, and to sustain development gains,” he said.

The Philippines was in the World Bank’s lower-middle income category since 1987 before its latest reclassification.