ON Wednesday this week, the Asian Development Bank (ADB) presented its September update to its Asian Development Outlook (ADO), which is perhaps the most comprehensive economic forecast available to the Philippines and other Asian countries. It is also one of the most up to date; when the September ADO update was released on Sept. 23, the data in the report was less than three weeks old, being valid as of Sept. 4. The ADO is updated several times a year, usually in January, April, July and September, and focuses on tracking changes from the previous update. As such, it is an excellent, almost real-time tool for our policymakers, and for the public to understand what is happening with the economy.
For the Philippines, the September ADO update presented a decidedly less than encouraging outlook. One might look at it as bad news for the economy for the rest of this year and into the next; we prefer to think of it as “challenging.” If our economic decision-makers use the ADO as intended, it identifies risks to be managed rather than inevitabilities.
In broad terms, the Philippines is unfortunately a standout in lagging economic performance in our region. In the September ADO, ADB lowered its GDP growth forecast to 3.3 percent for 2026 from 3.8 percent in the July ADO update, and lowered the forecast for 2027 to 5.1 percent from 5.3 percent previously. The inflation forecast for 2026 remains unchanged from July at 5.9 percent, while it was increased for 2027 from 3.9 percent to 4.4 percent. These indicators stand in noticeable contrast to the rest of the region, or in other words, the Asean countries except for Singapore, where overall GDP growth in 2026 and 2027 is forecast to rise by 0.2 percent and 0.1 percent, respectively, and inflation is expected to increase by 0.1 percent in 2026 and 0.3 percent in 2027.
It may be of some comfort, however, that the risk factors involved in making the Philippines’ outlook as downbeat as it is are almost entirely external, primarily the impacts from a strong El Niño that are already being felt and almost certain to worsen in the next few months, and the fallout from the war in the Middle East.
Between the two phenomena, the ADB assessment placed significantly greater emphasis on the El Niño, perhaps because it is something that affected countries can still prepare for and mitigate some of the impact. The El Niño is expected to last until at least the early part of 2027 and peak in intensity at the end of this year, and will have its greatest impact on agriculture and food prices, but affected energy production, general economic productivity, and public health as well.
One point that is not particularly highlighted in the September ADO report but was raised during the ADB’s media briefing on Sept. 23 is that the effects from El Niño on food prices will extend well into 2027, even after the climate disruption has dissipated. In past El Niño events, rice prices have tended to peak six to nine months after the return to neutral conditions, meaning that inflation and cost-of-living pressures may be troublesome throughout most of next year.
One spot of good news is that remittances from the Middle East have held up, posting modest increases year on year in the first six months of 2026. The growth in remittances has not been enough to counteract inflation, but the decline in spending power for remittance-receiving families has been offset to a considerable degree by the depreciation of the peso. The Philippines is classified by ADB as “dependent” on remittances from the Middle East (along with Sri Lanka, Pakistan and Bangladesh), with the region accounting for about 18 percent of all remittance inflows to the Philippines, or about 1.6 percent of gross domestic product (GDP). Similarly, the Philippines is not seen as being particularly at risk from its debt burden or fiscal deficit, and when asked about the depreciation of the peso throughout this year, ADB’s experts opined that it was not as serious a problem as it may have been characterized by news reports and public conversation, and is not an outlier in the region.
While the Philippines is lagging and has not absorbed the impact of global shocks as well as our peers so far, it still has a reasonably firm footing to respond to economic risks and counter adverse impacts. But it will take alert, targeted economic policy choices and implementation. The government should not allow itself to be distracted.
