By Katherine K. Chan, Reporter
THE PHILIPPINE ECONOMY could face added pressure from a looming El Niño episode because it continues to grapple with the autumnout from the flood control graft scandal and elevated energy costs linked to the Iran war, in line with Nomura Holdings, Inc. Global Markets Research.
In a report dated May 12, the Japan-based think tank said the Philippines, together with Thailand, Indonesia, India and Australia, is increasingly vulnerable to mounting economic pressures tied to inflation, external imbalances and worsening weather conditions.
“Thailand, Indonesia, India, Australia and the Philippines are… under growing strain,” Nomura said, citing widening twin deficits in some economies and accelerating inflation in others, including the Philippines.
The warning comes because the Philippine Atmospheric, Geophysical and Astronomical Services Administration raised the probability of a moderate to severe dry spell to 79% from June until early next 12 months.
The newest outlook marked a pointy increase from the 55% probability forecast issued in March.
If severe dry conditions materialize, the country’s agricultural sector could take one other hit as farmers proceed to face elevated fertilizer costs and provide disruptions brought on by the energy crisis stemming from the Iran war.
The Department of Agriculture has warned that agricultural output could decline by as much as 30% under a “Super El Niño” scenario.
Farm production has already weakened. Government data showed agricultural output contracted by 0.3% in the primary quarter after declines in crops and fisheries offset gains in other subsectors.
Nomura earlier cut its Philippine gross domestic product (GDP) growth forecast for 2026 to 4.6% from 5% after the weaker-than-expected first-quarter economic expansion.
The economy grew by just 2.8% within the January-to-March period, slower than the three.4% median estimate in a BusinessWorld poll and marking the weakest quarterly growth because the pandemic recovery period.
The Philippines also expanded by only 4.4% in 2025, the slowest in five years, after the flood control corruption scandal dampened investment activity, government spending and consumer demand through the second half of last 12 months.
Nomura’s revised forecast is below the federal government’s 5% to six% growth goal for 2026 and suggests the country could miss its official growth goal for a fourth straight 12 months.
The think tank said weak sentiment, elevated prices and slow public spending are prone to keep economic activity subdued in the primary half.
It also raised its inflation forecast for the Philippines to six.1% this 12 months from an earlier 4.9% estimate, well above the Bangko Sentral ng Pilipinas’ 2% to 4% goal.
Inflation accelerated to 7.2% in April, driven by higher food, transport and housing costs amid elevated fuel prices and provide disruptions linked to the Iran war.
TOURISM SLOWDOWN
In a separate report, Nomura said the Iran war has also began to affect tourism flows in parts of Southeast Asia after airspace closures and flight disruptions across the Middle East reduced travel demand.
Nomura Global Markets Research Chief ASEAN Economist Euben Paracuelles and Research Analyst Yiru Chen said arrivals from the Middle East to Association of Southeast Asian Nations (ASEAN) economies dropped sharply in March and April.
Thailand posted a 49.7% year-on-year decline in tourist arrivals from the Middle East in April, worsening from a 3.7% drop in the primary two months of the 12 months.
Singapore posted a 34.2% decline in March from an 11.2% contraction in January and February, while Malaysia arrivals from the region fell 29.8% after earlier growth.
The analysts also noted weaker visitor arrivals from Europe following the outbreak of the Iran war in late February.
Nonetheless, stronger tourist inflows from countries resembling China partly offset the decline.
Within the Philippines, tourism remained resilient despite the conflict. Government data showed international visitor arrivals had risen nearly 9% 12 months on 12 months to 2.24 million as of April 27.
The Department of Tourism has kept its goal of attracting 6.7 million foreign visitors this 12 months.
Still, Nomura warned that higher jet fuel prices, airfare increases, and fuel surcharges could weaken travel demand across ASEAN in the approaching months.
“Unlike in 2022, there is no such thing as a pent-up demand after borders reopened following the pandemic,” the analysts said. “Travel demand will likely be more price-sensitive now, and airfare price hikes, together with flight cancellations, could cause a more broad-based impact.”