ADB, S&P slash PH GDP growth forecasts for 2026
Manila-based Asian Development Bank (ADB) and global debt watcher S&P Global Ratings sharply cut their growth forecasts for the Philippines this year, citing the fallout from the prolonged Middle East conflict, weak government spending and climate-related shocks.
In its flagship Asian Development Outlook report released Wednesday, the ADB lowered its gross domestic product (GDP) growth forecast for the Philippines to 3.3 percent from 3.8 percent previously.
S&P was even more pessimistic, cutting its 2026 forecast to 2.9 percent from 4.1 percent before in its latest Asia Pacific economic outlook.
The downgrades underscore the growing challenges facing an economy that expanded just 2.6 percent in the first half, as higher energy costs and a confidence slump linked to a major corruption scandal weighed on activity.
Both forecasts put growth below the Marcos administration’s target of 3.5 percent to 4.5 percent for this year.
The ADB’s new projection would leave the Philippines trailing most of its Southeast Asian neighbors. It expects Vietnam to grow 7.8 percent, Indonesia 5.2 percent, Malaysia 4.9 percent, Laos 4 percent and Cambodia 3.9 percent. Thailand, Myanmar and Brunei Darussalam are projected to expand by 2 percent, 2.2 percent and 1.2 percent, respectively.
The bank said elevated inflation would continue to weigh on household spending, while soft labor market conditions could further constrain consumption. It expects inflation to average 5.9 percent this year as the conflict in the Middle East fuels volatility in global energy markets.
Price pressures could intensify if a severe el niño develops late in the year, potentially pushing up food costs, the ADB warned.
“For the Philippines to ride through the effects of external and domestic shocks in the near term, timely government spending on planned investments especially in the social sector and critical infrastructure projects will be important,” said Andrew Jeffries, the bank’s country director.
The vulnerabilities have already shown up in the data. State spending on infrastructure contracted 32.4 percent in the first half, while household consumption growth slowed to 2.8 percent.
Looking ahead, the ADB expects growth to rebound to 5.1 percent in 2027, though it also lowered that forecast from 5.3 percent previously.
Inflation pressures are expected to persist into next year, with the ADB raising its forecast for average price growth to 4.4 percent from 3.9 percent. That would keep inflation above the Bangko Sentral ng Pilipinas’ 3 percent target.
While favorable base effects would help lift growth above 5 percent next year, Jeffries said there were also signs of convincing recovery in some key economic activities.
“We’ve already seen indications of more government outlays for infrastructure projects, including large transportation projects,” he said. “There’s downside risks ahead and possible upside risks depending on how some of these external events play out over time.”
S&P lowers outlook
Meanwhile, S&P’s 1.2-percentage-point cut was the largest among the 14 economies covered in its latest report. The new Philippine forecast is well below S&P’s 4.6-percent growth outlook for the Asia Pacific region.
The Philippines was one of only three economies to receive a downgrade, alongside China and Hong Kong, whose forecasts were trimmed by only 0.1 and 0.3 percentage point, respectively.
For 2027, S&P expects the Philippine economy to rebound to 5.4 percent, higher than its 4.4-percent regional growth forecast and within the government’s 5- to 6-percent target. Still, this was also lower than its previous 5.8-percent projection.
“We have lowered our growth forecast for 2026, reflecting the weaker-than-expected first-half growth and a more gradual recovery trajectory. It will take some time for the economy to recover its footing,” Vishrut Rana, an economist at S&P Global Ratings, said.
“Given strong reforms in the space to increase transparency and efficiency, it will take time for disbursements to ramp up. Elevated energy and food prices, together with the resulting tighter monetary policy, will continue to weigh on domestic demand,” Rana added.
But Rana said the country could rely on its competitive business process outsourcing sector and strong private-sector interest in special economic zones to support stronger growth over the medium term.
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