THE WORLD BANK (WB) sees a gradual recovery for the Philippines in 2026 and 2027, after growth slowed this yr because of weaker investment and sluggish consumption, compounded by a corruption scandal and a string of natural disasters.
In its latest Philippines Economic Update released on Tuesday, the multilateral lender trimmed its Philippine gross domestic product (GDP) growth forecast to five.1% for this yr from 5.3% in its June report.
For 2026, it lowered its Philippine GDP growth forecast to five.3% from 5.4% previously.
The World Bank also cut its Philippine GDP growth projection for 2027 to five.4% from 5.5% previously.
These latest projections are below the federal government’s 5.5-6.5% growth goal for this yr and the 6-7% goal for 2026 to 2028.
“To borrow from Torsten Slok, chief economist at Apollo (Management), it’s a Nike swoosh pattern. He describes the US economy, and I’m describing our forecast for the Philippines as a type of Nike swoosh. Now we have a dip in 2025, after which we’ve got a gradual recovery in 2026 to 2027,” World Bank Senior Economist Jaffar Al-Rikabi said during a briefing.
He noted the common growth of the Philippines over 2025 to 2027 can be lower than 2024 when GDP expanded by 5.7%.
“For 2025… the expansion is essentially weighed down by domestic aspects. Particularly, lower construction activity and weaker consumption growth,” he said.
The Philippine economy expanded by a weaker-than-expected 4% within the third quarter, bringing nine-month growth to five%, because the pace of household final consumption expenditure and government spending slowed amid a corruption scandal.
Mr. Al-Rikabi also noted the deceleration in fixed investment and personal consumption because of higher-than-expected variety of natural disasters that hit the Philippines this yr.
“But for 2026 to 2027, we predict that it’s likely that external aspects will weigh more heavily on growth, largely slower export demand,” Mr. Al-Rikabi said.
The US imposed a 19% tariff on most goods from the Philippines starting August, dampening export demand.
The World Bank said the Philippine economy’s growth will pick up in 2026 and 2027, fueled by strong domestic demand.
“Private consumption is projected to strengthen as inflation stays low, employment stays robust, and monetary easing lowers rates of interest, making it easier for businesses and households to borrow,” it said within the report.
In accordance with the World Bank, private consumption, which accounts for greater than 70% of the economy, is projected to expand by 4.8% this yr, slowing from 4.9% in 2024. This is anticipated to choose as much as 5.3% in 2026 and 5.4% in 2027.
The World Bank said investment is prone to get well as public infrastructure projects regain momentum, while recent liberalization reforms in telecommunications, transport, logistics and renewable energy improve the business climate.
The multilateral lender also expects headline inflation to average 1.8% this yr, describing the pace as “very moderate” and a key source of resilience. This forecast is barely above the Bangko Sentral ng Pilipinas’ (BSP) 1.7% projection for 2025 and the 1.6% average recorded in the primary 11 months.
‘CORRUPTION IS UNACCEPTABLE’
At the same time as the Philippine economy will see a gradual recovery within the next two years, Mr. Al-Rikabi noted risks are tilted to the downside, with “more outstanding” domestic drivers.
“There may be a continued challenge of heightened perceptions around governance risks. This might, if it continues, erode investor confidence. It could delay public investment execution, and it could weaken growth,” he said.
The World Bank economist also noted there could also be delays in fiscal and structural reforms amid the present domestic environment, “which could slow consolidation and weigh on growth over the medium term.”
A corruption scandal involving anomalous flood control projects has already triggered protests, slowed economic activity, and shaken investor confidence within the country.
“From the World Bank perspective, corruption is unacceptable,” World Bank Country Director for the Philippines, Malaysia, and Brunei Zafer Mustafaoğlu said in the course of the same briefing.
“The World Bank considers it detrimental to any country and has been fighting against corruption in all of the member countries that we operate in,” he added.
Mr. Mustafaoğlu said the Philippine government could take this chance to extend transparency and modernize its budget execution system “that would actually support longer-term growth and may increase investment confidence (and) can increase long-term potential growth,” he said.
Mr. Al-Rikabi said it will be significant that the Philippine government double down on governance and institutional reforms. The federal government also needs to proceed fiscal reforms to make sure “fiscal consolidation continues on a reputable path that doesn’t compromise long-term growth.”
Also Mr. Al-Rikabi said adversarial climate events remain a source for risk for the Philippines, because it could disrupt food supply and drive prices higher.
On external risks, the World Bank cited policy uncertainty, which could weaken investment trading confidence, disruptive financial market corrections, and weaker growth in key partner countries.
He also noted that as investments in artificial intelligence normalize, major economies could face sharper deceleration, which might weigh on Philippine exports and industry.
Mr. Al-Rikabi said the federal government should ensure structural reforms, which opened up some sectors to more foreign investments, are implemented effectively.
UPPER MIDDLE-INCOME STATUS
Meanwhile, Mr. Al-Rikabi said the Philippine gross national income (GNI) per capita has managed to achieve the upper middle-income country (UMIC) status threshold in 2025.
“Our 2025 projection already implies that the Philippines will reach by way of GNI per capita the brink for UMIC this yr,” he said.
In accordance with the World Bank’s last country income classification, the Philippines remains to be a lower middle-income country with a GNI per capita of $4,470 in 2024. It was only $26 shy of the World Bank’s adjusted GNI per capita requirement of $4,496-$13,935 for UMIC status.
Nonetheless, Mr. Al-Rikabi said that the World Bank has to see three years of GNI per capita above the brink to formally reclassify a rustic as UMIC.
“That means so long as the economy continues to grow in 2026-2027, the country could be reclassified as UMIC in 2028,” he said.
The Washington-based lender will release its latest country status thresholds in July 2026. — A.R.A. Inosante