BMI cuts PH ’26 growth forecast to 4.7%
The Philippines is facing a downbeat economic growth outlook for the year as BMI Research cited the possibility of a prolonged energy shock from the Middle East war.
In a note to clients, BMI, a unit of Fitch Group, lowered its full-year growth forecast to 4.7 percent from 5.1 percent. While this marks an improvement from 4.4 percent in 2025, it still falls short of the government’s revised target of 5 percent to 6 percent.
The research firm also estimated first-quarter growth at 3.6 percent, better than the actual growth of 3 percent in the fourth quarter of 2025.
BMI had previously retained its forecast last month, but the escalation of the US-Iran conflict in its fifth week prompted a reassessment.
“That said, subdued government capex (capital expenditure) continued to weigh on overall activity. Furthermore, the US-Iran conflict darkens our outlook for the rest of the year,” the note read.
The downgrade assumes an “extend to end” scenario, where the conflict continues for another four weeks and oil prices remain high, with domestic diesel and gasoline prices rising roughly 80 percent and 50 percent, respectively.
“Indeed, we now think there is a 45 percent probability of an ‘Extend to Escalate’ scenario, where negotiations fail, and the US proceeds with military escalation in an attempt to reopen the Strait of Hormuz,” BMI said.
“Higher fuel costs will erode household purchasing power and weigh on growth, while government measures to curb energy consumption—including a four-day work week for public sector workers—will add further to this drag,” it added.
Energy emergency
The Philippine government recently declared a state of national energy emergency—making it the first country in the world to do so—tasking agencies with implementing measures to cushion the impact of rising fuel costs.
One of the most anticipated steps is the possible suspension of fuel excise taxes, which the Department of Finance said could take effect by mid-April, pending the recommendation of the Development Budget Coordination Committee.
But even with these interventions, BMI said inflation would likely spike to 3.6 percent this year, while the central bank may refrain from further easing, signaling it’s “willing to look past short-term supply-shock inflation.”
The inflation projection would still fall within the government’s 2 percent to 4 percent target range. However, it is more conservative than the Economic Planning Department’s own forecast, which anticipates inflation at around 4.5 percent to 4.8 percent.
“We stress also that how the conflict will play out remains highly uncertain, and the risks are tilted heavily towards even weaker growth, weaker FX (foreign exchange) and higher inflation forecasts,” BMI said.
