MANILA, Philippines — The Philippine economy is expected to regain momentum in 2027 as investment picks up and activity in the services and industry sectors strengthens, although prolonged conflict in the Middle East and climate-related shocks could weigh on growth, the Asian Development Bank said Wednesday.
In its Asian Development Outlook September 2026, the ADB cut its Philippine GDP growth forecasts to 3.3% for 2026 and 5.1% for 2027, from its previous projections of 3.8% and 5.3%, respectively.
The downgrade comes as the prolonged Middle East conflict has had a larger-than-expected impact on the economy, including weaker investment in the first half of 2026 and higher prices for imported fuel, fertilizers and other key commodities.
“The economy continues to feel the impact of the Middle East conflict, but business indicators point to expected improvements in economic activity, with the industry sector still looking to expand next year,” ADB Philippines Country Director Andrew Jeffries said.
He said timely government spending on planned investments, particularly in social services and critical infrastructure, would be important in helping the economy withstand external and domestic shocks.
The ADB expects the services sector, which accounts for about 60% of the country’s GDP and employment, to remain a major source of growth. Manufacturing and public construction are also expected to pick up.
The government plans to accelerate major infrastructure projects covering transport networks, railways, ports and bridges, as well as investments in health, education and agriculture.
Around one-third of the proposed 2027 national budget is allocated to social services, including healthcare, educational assistance, early childhood development, upskilling programs, conditional cash transfers and food vouchers for vulnerable families.
Inflation is projected to average 5.9% in 2026, unchanged from the ADB’s July forecast, before easing to 4.4% in 2027. The new 2027 projection, however, is higher than the previous 3.9% forecast.
Food prices are expected to remain a key source of inflationary pressure, particularly as the effects of a severe El Niño dry spell expected to begin in late 2026 weigh on agricultural production.
The ADB identified both the Middle East conflict and climate-related shocks as major downside risks to the outlook.
The Philippine government has been implementing measures to cushion vulnerable sectors from these shocks, including the rehabilitation of irrigation systems, increased investment in water resource management, distribution of drought-resistant seeds and agricultural inputs, and improved drought monitoring.
It has also provided targeted cash assistance, emergency livelihood support, fuel subsidies, public transport fare discounts and assistance to small businesses and heavily affected sectors such as agriculture and transportation under its Unified Package for Livelihoods, Industry, Food, and Transport (UPLIFT) program.
The ADB is also preparing assistance for the government’s response to the economic effects of the Middle East conflict through its Countercyclical Support Facility.
The Asian Development Bank is a multilateral development bank that supports sustainable and inclusive growth across Asia and the Pacific. Founded in 1966, it is owned by 69 members, 50 of them from the region.
