By Katherine K. Chan, Reporter
THE MIDDLE EAST conflict threatens the Philippines’ growth prospects but a recertain in private spending and robust exports could still position the country because the second fastest-growing economy within the region, the ASEAN+3 Macroeconomic Research Office (AMRO) said.
AMRO Chief Economist Dong He said Philippine gross domestic product (GDP) is anticipated to expand by 5.3% this 12 months, unchanged from their forecast in January, and by 5.8% in 2027.
“This makes the Philippines considered one of the faster-growing economies within the region — above the ASEAN (Association of Southeast Asian Nations) average of 4.6% and the ASEAN+3 average of 4%,” Mr. He told BusinessWorld in an e-mail interview. “The acceleration reflects an expected recovery in private consumption and stronger exports.”
If each projections hold true, the Philippines could be the second fastest-growing economy throughout the ASEAN, only trailing Vietnam which is seen to expand by 7.4% this 12 months.
The country can be seen to outpace Indonesia (5%), Cambodia (4.9%), Laos (4.6%), Malaysia (4.6%), Singapore (3.4%), Myanmar (2.5%), Brunei (1.9%) and Thailand (1.7%).
The Philippine economy can be expected to surpass its 4.4% growth last 12 months or when the flood control graft scandal slowed government spending, household consumption and investments within the country.
AMRO’s projections are inside the federal government’s 5-6% GDP growth goal for this 12 months and 5.5-6.5% for 2027.
Household spending, which accounts for over 70% of the country’s GDP, grew by 3.8% within the fourth quarter, the weakest pace seen for the reason that -4.8% in the primary quarter of 2021. Full-year household spending growth eased to 4.6% in 2025 from 4.9% in 2024.
Although AMRO maintained its growth estimate for the Philippines, it noted that domestic demand may proceed to be subdued all year long.
“In 2026, tariff effects are expected to materialize and dampen external activity, while domestic demand can be expected to stay soft in a couple of economies, notably Thailand and the Philippines,” AMRO said in its latest Regional Economic Outlook for 2026.
While the country could also be well positioned this 12 months, Mr. He also noted that global trade uncertainties and financial market volatility and energy shocks amid the continued conflict within the Middle East could weigh on its economic growth.
“The conflict within the Middle East and the resulting disruption to the Strait of Hormuz pose essentially the most immediate risk to the outlook — a protracted disruption to global energy supply could push inflation higher and weigh materially on growth,” he said.
“Other key risks include unpredictable US trade policy shifts, the uncertain trajectory of technology demand, and volatile global financial markets,” he added.
Oil trade disruptions have led to energy price shocks globally, with the Philippines facing oil price surges and looming fuel shortages because the war drags on.
AMRO Group Head and Lead Economist Allen Ng said the economy could grow even faster if not for the economic drags triggered by the worldwide oil crisis from the Middle East war.
“I believe there was strong momentum in growth within the Philippines prior to the escalation of the conflict, and it’s driven so much by domestic demand activities,” Mr. Ng said at a press briefing on Monday.
“So, what we now have seen is that if, again, if the Iran conflict (had) not occurred, the expansion might have been higher for the case of the Philippines,” he added.
EXTERNAL HEADWINDS
Meanwhile, Mr. He said the Philippines will likely remain resilient against tariff and trade disruptions.
“The Philippines has been relatively less affected by tariff and trade disruptions, reflecting its more domestically driven growth and lower reliance on goods exports,” he said.
“Nevertheless, vulnerabilities remain in electronics and semiconductor exports. To mitigate risks, the country should further diversify export markets, improve trade facilitation and logistics, and attract firms searching for supply chain relocation to strengthen external resilience,” he added.
The country’s goods exports grew by 15.2% to $84.41 billion last 12 months, exceeding the Bangko Sentral ng Pilipinas’ (BSP) projected 9% growth to $60 billion.
For this 12 months, the BSP expects goods exports to rise modestly by 3% to $65.3 billion amid reduced front loading and elevated trade costs, before picking up by 4% to $67.9 billion in 2027.
The knowledge technology and business process management (IT-BPM) and finance sectors might also help drive the country’s growth this 12 months, Mr. He said.
Nevertheless, he noted that the IT-BPM industry needs policies to support its shift toward knowledge process outsourcing (KPO) and global capability centers (GCCs) activities.
“For the Philippines, the high value-added knowledge-based services, equivalent to the IT-BPM and finance would proceed to be the important thing sources of value-added creation,” Mr. He said. “Nevertheless, with AI (artificial intelligence) becoming increasingly prevalent, a concerted shift is required toward higher-value segments, namely, KPO, GCCs and digital trade services.”
Amid current economic shocks, Mr. He also said the Philippines has a “sharper mandate than usual” in tightening regional cooperation and addressing shared economic challenges because it takes the helm within the ASEAN.
“The present moment — where trade disruptions and an energy shock are testing the region concurrently — gives the chairmanship a sharper mandate than usual,” AMRO’s chief economist said.
Mr. He said the National Government must pursue local reforms alongside regional development efforts, especially by drawing in private investments, enhancing infrastructure delivery and strengthening capital markets.
“The present external environment raises the price of delaying these reforms,” he added.
This 12 months, the Philippines assumed chairship of the 11-member regional bloc, composed of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam and Timor-Leste.