S&P cuts PH growth outlook to 4.1%
The Philippines received the largest growth forecast downgrade for 2026 among Asia-Pacific economies in S&P Global Ratings’ latest outlook as the impact of the oil shock and weaker public infrastructure spending continues to weigh on the economy.
In its latest report, S&P slashed its 2026 gross domestic product (GDP) growth forecast for the Philippines to 4.1 percent from 5.8 percent previously.
The 1.7-percentage-point cut was the steepest among the 14 Asia-Pacific economies tracked by S&P, with only four countries seeing downward revisions to their 2026 growth forecasts.
The revised projection is also below S&P’s 4.4-percent growth forecast for the Asia-Pacific region, which was left unchanged.
Still, the forecast falls within the Marcos administration’s newly revised growth target of 3.5 percent to 4.5 percent for the year.
“Asia-Pacific economic growth largely held up in early 2026. In the first quarter, GDP growth met or exceeded expectations in most economies, with generally solid contributions from both exports and domestic demand,” S&P said.
“However, growth significantly lagged expectations in the Philippines, where the energy shock combined with a sharp reduction in public infrastructure spending related to the misutilization of funds,” it added.
The downgrade came despite S&P assuming that disruptions in the Strait of Hormuz would gradually ease in the second half of the year, with global oil prices seen returning to precrisis levels by early 2028.
But the debt watcher expects economic growth to rebound to 5.8 percent in 2027, although this was slower than its previous forecast of 6.2 percent.
By 2028, the agency maintained its growth projection for the Philippines at 6.2 percent.
S&P also forecasts the central bank to raise its benchmark interest rate by another 25 basis points to 5 percent this year. It likewise expects the peso to average 60.5 against the dollar and the unemployment rate to settle at 4.5 percent.
The latest forecasts follow S&P’s decision in April to revise its sovereign outlook on the Philippines to “stable” from “positive,” dimming prospects for the country to secure its first-ever “A” credit rating in the near term.
A stable outlook indicates that the Philippines’ “BBB+” investment-grade rating is unlikely to change over the next one to two years.
As it is, the local economy grew by just 2.8 percent in the first quarter, as the combined impact of the oil shock and lingering fallout from the graft scandal weighed on activity.
Inflation accelerated to 4.1 percent in March, the first full month following the outbreak of the Middle East war, before surging to 7.2 percent in April. It eventually eased to 6.8 percent in May, though it remained among the highest in three years.
Meanwhile, government spending growth slowed to 4.8 percent in the first quarter, while infrastructure spending contracted by 3.3 percent.
Latest data from the Department of Budget and Management showed that infrastructure disbursements remained under pressure as of April, suggesting public investment has yet to recover.
