The Philippine economy is headed for a sharper slowdown in 2026 as elevated energy costs, weak public investment and subdued business confidence weigh on domestic demand, the World Bank said, while lowering its growth outlook for next year.
In its October 2026 East Asia and Pacific Economic Update, the World Bank kept its Philippine growth forecast for 2026 at 3.7%, unchanged from its April projection. But it cut its 2027 forecast by 0.4 percentage point to 5.2 percent, from 5.6 percent previously. Growth is projected to reach 5.5 percent in 2028.
“Growth in the Philippines is projected to slow to 3.7 percent in 2026 as weakness in domestic demand widens the negative output gap,” the lender said.
The downgrade comes as inflation is expected to climb to 5.8 percent this year, with higher energy prices squeezing household purchasing power while raising production costs for businesses. The World Bank also pointed to weak public investment and softer confidence as constraints on private investment.
The economy grew just 2.3 percent year-on-year in the second quarter, its weakest expansion since the pandemic. Public construction plunged 32 percent, while private construction growth slowed to 3.8 percent. Net foreign direct investment inflows also dropped to their lowest level since 2016.
Exports, however, have provided an important buffer. Merchandise exports rose 13 percent in the first half, helped by a 21 percent increase in electronics exports as global demand tied to artificial-intelligence investment strengthened.
The World Bank said Philippine growth could recover to an average 5.4 percent in 2027-2028, but cautioned that the rebound depends on public investment recovering and inflation normalizing by 2027.
The outlook also highlights the Philippines’ vulnerability to energy shocks. The World Bank said the country has “suffered more than other EMDEs from high energy prices,” even as AI-related trade has supported growth elsewhere in the region.
