By Katherine K. Chan, Reporter
THE PHILIPPINE ECONOMY is anticipated to expand by 4.9% this yr, reflecting weak domestic momentum and the energy crisis attributable to the Middle East conflict, Moody’s Analytics said.
In a report on Monday, Moody’s Analytics said it cut the Philippine gross domestic product (GDP) growth projection to 4.9% this yr from 5.1% previously.
While it is quicker than the post-pandemic low of 4.4% growth in 2025, it can be below the federal government’s 5-6% growth goal for 2026.
“The revision reflects a reassessment of domestic momentum after weaker-than-expected expansion in 2025, fairly than any major change in our geopolitical assumptions,” Moody’s Analytics Assistant Director and Economist Sarah Tan said in an e-mail. “In our baseline, we assume the Middle East conflict stays contained and ends soon, so the direct impact on Philippine growth ought to be limited.”
Still, Ms. Tan noted that the Middle East war could drag their outlook, as the web oil importer Philippines stands vulnerable to grease price shocks.
“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 (BSP) to pause its easing cycle and even tighten policy if second-round effects emerge,” she said.
Within the report, Moody’s Analytics economists noted that the Middle East war could worsen economic shocks from the looming impact of the USA’ recent tariff policies.
“This yr is shaping as much as be a fair more difficult yr for the region than originally envisaged,” Moody’s Analytics’ Stefan Angrick, Denise Cheok and Ms. Tan said. “A more severe and prolonged conflict within the Middle East would compound existing tariff pain.”
Earlier this yr, US President Donald J. Trump threatened to impose a brand new 15% tariff on all goods entering the US, which analysts warned could dampen the country’s export recovery.
Moody’s Analytics also trimmed its Philippine growth projection to five.2% from 5.4% for 2027, falling wanting the federal government’s 5.5%-6.5% goal.
For 2028, the think tank expects Philippine GDP to expand by 5.3%, unchanged from its previous forecast and well below the Development Budget Coordination Committee’s 6%-7% goal.
The Asia-Pacific (APAC) region can also be expected to post a slower growth of 4% this yr from 4.3% in 2025, before weakening further to three.6% next yr as recent US tariffs bite and the Middle East war triggers major price shocks, Moody’s Analytics noted.
“Conflict within the Middle East has sent commodity prices surging, raising the chance of a fresh inflation surge. US tariff policy stays in flux, with the specter of higher import levies removed from gone. And the jittery global backdrop is keeping financial markets on edge,” it said.
In line with Moody’s, the Philippines is the sixth most reliant country on imported oil amongst APAC economies, with net energy imports accounting for over 50% of its total domestic consumption.
Ms. Tan earlier told BusinessWorld that oil price shocks as a result of the recent strikes on key energy facilities within the Middle East and trade disruptions within the region will likely be temporary, stopping a long-term inflation uptrend.
Moody’s projects inflation to finish the yr at a median of two.5%, faster than its 2.3% forecast last month.
Nevertheless, it lowered its inflation estimate for 2027 to three% from 3.1% but maintained its 2028 forecast at 3.1%.
Faster inflation could prompt central banks within the region to carry or hike their policy rates, Moody’s said.
Ms. Tan has noted that the BSP will likely go for a chronic pause, but oil price shocks driving transport fares and electricity rates higher raise the chances of a rate hike.
SPENDING WOES
Meanwhile, Nomura Global Markets Research said sluggish government spending amid the lingering effects of last yr’s flood control mess may derail the Philippines’ economic recovery in the approaching months.
This got here after government spending fell sharply in January, a trend Nomura economists said signals intensified fiscal tightening amid ongoing probes into the flood control graft scandal.
“This reflects a worsening of the fiscal tightening, owing to the corruption controversy,” Nomura Global Markets Research Chief ASEAN Economist Euben Paracuelles and Southeast Asia Economist Nabila Amani said in a report dated March 20.
“As we’ve argued before, the shortage of pre-procurement activity last yr will contribute to weak budget disbursement in coming months before the federal government implements [their] catch-up spending plan,” they added.
Latest data from the Bureau of the Treasury showed that government spending got here in at P303.5 billion in January, 23.9% lower than the P398.8 billion logged a yr ago.
This marked the sixth straight month that expenditures declined on an annual basis.
Primary spending, which excludes interest payments, fell sharply by 40.32% to P175.5 billion throughout the month from P294.4 billion in January 2025.
Mr. Paracuelles and Ms. Amani said the numerous decline in spending “suggests a limited near-term economic recovery,” posing additional pressure on their growth expectations especially amid emerging risks from the US-Israeli war on Iran.
Nomura sees the Philippine economy recovering from last yr’s slump to expand by 5.3% this yr.
Meanwhile, Moody’s Analytics’ Ms. Tan said the federal government’s decision to cut back its targeted infrastructure spending-to-GDP ratio would mean less support for domestic demand.
“The lower infrastructure spending goal of around 4.3% of GDP versus the sooner planned 5.1% suggests public investment will provide less support to overall demand than previously expected,” she said.
The federal government wants infrastructure spending to make up 4.3% of GDP this yr or about P1.3 trillion, lower than its earlier goal of 5.1%.