By Justine Irish D. Tabile, Senior Reporter
The Asian Development Bank (ADB) slashed its 2026 growth forecast for the Philippines to 4.4%, amid heightened uncertainty from the Middle East war.
In its Asian Development Outlook (ADO) April 2026 report, the Philippine-based multilateral lender cut its Philippine gross domestic product (GDP) growth projection to 4.4%, from its 5.3% forecast in December.
That is below the Philippine government’s 5-6% GDP goal range for 2026, but the identical pace as last 12 months’s growth. In 2025, the Philippine economy expanded by a weaker-than-expected 4.4%, the slowest in five years or 2020 when GDP contracted by 9.5%.
For 2027, the ADB sees GDP expanding by 5.5%, on the low-end of the federal government’s 5.5–6.5% goal, “based on the belief that inflationary pressures will ease.”
“We see growth remaining subdued because the country faces strong headwinds from the continued Middle East conflict,” said ADB Senior Economics Officer Teresa B. Mendoza in a media briefing on Friday.
“As we all know, being heavily depending on imported oil, the worldwide oil price shock has quickly transmitted to the economy,” she added.
The Philippines is a net importer of oil, and sources most of it from the Middle East, making it extremely vulnerable to cost volatility and provide disruptions.
The ADB expects Philippine growth to be mainly fueled by domestic demand and investment, but this may increasingly be tempered by rising price pressures.
“Domestic demand will proceed to profit from the lagged effects of monetary easing since 2024, but these gains might be partly offset by recent significant inflationary pressures and heightened uncertainties,” said Ms. Mendoza.
Last month, the Bangko Sentral ng Pilipinas (BSP) kept its benchmark rate unchanged at 4.25% in an off-cycle meeting to calm markets nervous over uncertainties arising from the US-Iran war.
In February, the BSP lowered the important thing rate by 25 basis points (bps) to an over three-year low of 4.25%, bringing total reductions to 225 bps because it began the easing cycle in August 2024.
The ADB expects headline inflation to choose as much as 4% this 12 months, higher than its January forecast of three%, under the baseline scenario. For 2027, the ADB projects headline inflation to ease to three.5%, inside the BSP’s 2-4% goal.
The BSP last month raised its inflation forecast for 2026 to five.1% from 3.6% previously; and for 2027 to three.8% from 3.2% previously.
“A protracted conflict, nonetheless, can intensify price pressures and drive inflation much higher,” said Ms. Mendoza.
Philippine inflation quickened to a virtually two‑12 months high of 4.1% in March, breaching the BSP’s 2–4% goal amid rising fuel costs.
“Oil price shocks have transmitted rapidly to domestic fuel pump prices, which have now greater than doubled,” said Ms. Mendoza. “Higher fuel and transport costs along with rising global prices of food, fertilizer, and other commodities are generating broader inflationary pressures,” she added.
Ms. Mendoza said the peso depreciation can also be adding to inflationary pressures because it raises import costs.
The peso closed at an all-time low of P60.748 against the greenback on March 31, only returning to the below-P60 level this week.
Nevertheless, Ms. Mendoza said the forecasts assume an “early stabilization scenario,” meaning if the war only lasts for 2 months or until this month.
ADB Country Director for the Philippines Andrew Jeffries said that a protracted Middle East conflict will “obviously (have) a negative effect on overall GDP growth for the country.”
“Perhaps more necessary is it’s a way more pronounced negative effect for pockets of the population versus the entire GDP figure for the country as a complete,” he added.
Ms. Mendoza said that one other key vulnerability for the Philippines is its remittances. The Middle East accounts for over 17% of total remittances within the Philippines, and a drawn-out conflict could affect overseas Filipino employees and household income, the ADB said.
“In some years, it has proven to be counter-cyclical. More remittances are being sent during crisis,” she said. “But this crisis, if it becomes really prolonged, even remittances can turn out to be highly vulnerable.”
The ADB said remittances should recuperate once conditions within the region improve.
Last 12 months, money remittances soared to an all-time high of $35.634 billion, accounting for 7.3% of the country’s GDP.
LOAN PROGRAM
Meanwhile, Mr. Jeffries said there’s “some uncertainty” across the multilateral lender’s loan program within the Philippines.
“Given this crisis and the fiscal strain that we don’t know the way long it would last, that might also affect what they borrow for and what they might must prioritize and postpone, and so forth,” he said.
“It’s just there’s loads more uncertainty around borrowing generally, including borrowing from ADB now, than, say, a 12 months or two years ago,” he added.
By way of the regular project pipeline, Mr. Jeffries said that some projects are being re-evaluated. He expects the federal government to conclude its review by next month.
The Philippines is amongst the most important recipients of sovereign support from the ADB.
As of December 2024, the ADB has committed public sector loans, grants and technical assistance totaling $36.5 billion, while its current sovereign portfolio within the country includes 25 loans value $10.2 billion.