WB slashes PH 2026 growth forecast to 3.7%
Philippine economic growth could potentially slow to its weakest pace in nearly two decades this year, as a prolonged Middle East war threatens the economy on multiple fronts and erodes household incomes, the World Bank (WB) warned.
In its latest East Asia and Pacific Economic Update, the Washington-based lender trimmed its growth forecast for the Philippines for this year to 3.7 percent, down from its previous projection of 5.3 percent back in January.
The new estimate would miss the Marcos administration’s 5 percent to 6 percent target and mark the weakest expansion in 17 years, excluding the pandemic-induced slump in 2020. The bank’s downgraded outlook would be the slowest growth since 2009, when the global financial crisis and powerful typhoons dragged expansion down to 1.4 percent.
The World Bank said growth could rebound to 5.6 percent in 2026, near the low end of the government’s 5.5-percent to 6.5-percent goal. Even so, the prediction would fall short of the economy’s estimated growth potential of about 6 percent.
Ergys Islamaj, a senior economist for East Asia and the Pacific at the World Bank, said the US-Iran war has far-reaching implications for the Philippines, a net oil importer.
“The Philippines is exposed to the conflict not only through energy and fertilizer imports but also through remittances,” Islamaj told a news conference, noting that 18 percent of remittances last year came from the Gulf region.
“A longer conflict will hurt the economy further,” he added.
On Wednesday, both the United States and Iran claimed victory after agreeing to a two-week ceasefire, pausing a devastating conflict that had upended a global economy already grappling with rising trade protectionism and rapid artificial intelligence disruption.
The war triggered a historic oil shock that prompted the Philippines to declare a national energy emergency, becoming the first country to do so. Already, domestic inflation rose to a near two-year high of 4.1 percent in March, exceeding forecasts.
The flare-up in consumer prices has fueled expectations of interest rate hikes, which could disrupt the economy’s recovery from a recent confidence shock tied to a major corruption scandal.
Islamaj warned that the painful price increases could erode household balance sheets in East Asia and the Pacific region.
That may further complicate things for the Philippines, which is hoping to reach upper-middle-income status this year. Already, the war has pushed the purchasing power of the peso to a record low of 0.75 centavos last month.
“A sustained 50 percent increase in fuel prices could lead to a 3 percent to 4 percent loss in income for households in the region,” the World Bank economist said.
