Researchers from De La Salle University have sharply downgraded their outlook for the Philippine economy, warning that rising energy costs, geopolitical tensions, and weak investment activity could drag growth to just 3.11 percent in 2026.
In a May 2026 economic report, DLSU economists said the country is entering a period of “massive growth deceleration” after first-quarter gross domestic product expanded only 2.81 percent well below expectations. The forecast is also significantly lower than the team’s previous 3.79 percent projection issued in April.
The report cited three major pressures weighing on the economy. These are disruptions in global oil supply caused by the Middle East conflict, the risk of tighter monetary policy if inflation remains elevated, and higher fertilizer prices feeding into food costs.
Researchers said the combined impact has worsened the country’s economic outlook more rapidly than anticipated.
The study projects growth slowing further to 2.30 percent in the third quarter before rebounding to 4.53 percent in the final quarter of 2026, supported by government spending, overseas Filipino remittances, and a modest recovery in investments.
The economists also warned that the Philippines remains highly vulnerable to external shocks because of its heavy dependence on imported fuel and fragile food supply chains.
They argued that recent government spending cuts and delayed infrastructure disbursements could deepen the slowdown instead of cushioning the economy.
Gross fixed capital formation is expected to contract 1.99 percent this year, marking the first annual decline since the pandemic. Foreign direct investment inflows have weakened, while higher borrowing costs are discouraging private sector expansion.
Despite the weak near-term outlook, the report sees medium-term recovery potential. Growth is forecast to improve to 3.93 percent in 2027 and 5.71 percent in 2028, helped by easing inflation, election-related spending, and the planned rollout of the Pax Silica semiconductor industrial hub.
