MidEast crisis to cap PH growth through ’28
The Philippine economy is unlikely to reach its 6-percent growth potential this year and may not do so until the end of President Marcos’ term in 2028, as conflict in the Middle East compounds external pressures not only for the country but for the wider region.
In a note to clients, Moody’s Analytics cut its growth forecast for the Philippines in 2026 to 4.9 percent, from 5.1 percent previously. If realized, that would mark an improvement from last year’s 4.5 percent expansion, but still fall short of the Marcos administration’s target of 5 percent to 6 percent.
The Moody’s unit also lowered its 2027 outlook to 5.2 percent from 5.4 percent, a revision that would represent another miss against the government’s goal of 5.5-percent to 6.5-percent growth.
The firm kept its 2028 forecast at 5.3 percent, which would likewise remain below the official target range of 6 percent to 7 percent.
Sarah Tan, economist at Moody’s Analytics, said the revisions reflect “a reassessment of domestic momentum after weaker-than-expected expansion in 2025, rather than any major change in our geopolitical assumptions.”
That view aligns with other observers, who have attributed last year’s weaker growth to a mix of climate-related disruptions and the Marcos administration’s sweeping anticorruption drive, which curbed government spending and weighed on confidence.
“In our baseline, we assume the Middle East conflict remains contained and ends soon, so the direct impact on Philippine growth should be limited,” Tan said.
Nevertheless, Tan said the risks to the outlook remain firmly to the downside amid the Middle East crisis. The war has disrupted traffic in the Strait of Hormuz—a key route for roughly a fifth of global oil supply—raising concerns over energy prices for oil-importing economies like the Philippines.
Worse, the country has no meaningful strategic reserves, leaving the economy highly exposed to higher oil and food prices.
“Higher import costs would feed into inflation, widen the trade deficit, and put pressure on the currency, which could force the Bangko Sentral ng Pilipinas to pause its easing cycle or even tighten policy if second-round effects emerge,” Tan said.
“Persistently high prices would erode household purchasing power and dampen consumption. Higher electricity costs, already among the highest in the region, would further weigh on business activity and overall growth,” she added.
Zooming out, the outlook points to a more challenging 2026 for the broader Asia-Pacific region than previously expected, as prolonged Middle East tensions add to the strain from higher US tariffs. Moody’s Analytics said the region began the year on fragile footing, weighed down by weak domestic demand and headwinds to export growth.
“Recent events have complicated the outlook considerably. Conflict in the Middle East has sent commodity prices surging, raising the risk of a fresh inflation surge,” the firm said.
