THE Asian Development Bank (ADB) reassesses its economic growth projections for the Philippines as the country faces mounting domestic and global uncertainties.
“We are revisiting the number because of this new Middle East conflict, which will certainly affect our growth forecast,” ADB lead economist for Southeast Asia James Villafuerte told reporters on Thursday.
“We are also tracking the progress in terms of the corruption scandal, which has affected confidence in investment flows. So, it’s quite kind of difficult to really call out the number,” he added.
The Manila-based lender last year lowered its growth forecast for the Philippines to 5.3 percent this year from 5.7 percent.
The country enjoyed a run of above 6.0-percent growth before the Covid-19 pandemic hit, leading to a 9.5-percent plunge in 2020. It saw a recovery in the following two years, recording a spike of 7.6 percent in 2022, but posted below-target results of 5.5 percent and 5.7 percent in 2023 and 2024.
Gross domestic product (GDP) growth further slowed to 4.4 percent last year amid the anomalies unveiled in infrastructure spending, markedly slower than the 5.7 percent growth in 2024.
Villafuerte said the duration and intensity of the Middle East conflict would play a critical role in shaping the economic outlook for the Philippines and the broader region. Oil prices have been volatile since the tensions escalated, briefly rising above $100 per barrel before easing again.
ADB chief economist Albert Park said that if the conflict ends relatively soon — within a month or two — the impact on regional economic growth would likely be modest, reducing growth by around 0.1 percentage point.
However, inflation could increase by about 0.5 percentage point even if the conflict ends quickly, given the significant role of energy in consumer price baskets across Asia.
“The negative effects on growth and the positive effects on inflation will depend greatly on how long the conflict lasts and how high oil prices go,” Park said.
Meanwhile, Villafuerte noted that the Philippines faces additional vulnerabilities due to its reliance on remittances and tourism, both of which could be affected if the conflict disrupts economic activity or travel in the Middle East.
Around one-fifth of overseas Filipino workers are based in the Middle East, making the region a key source of remittance inflows that support household consumption in the Philippines.
“My worry is if this really gets prolonged and Filipino workers in the Middle East are affected, that would have an impact on remittances,” Villafuerte said.
Historically, remittance flows have remained resilient even during global crises, and Villafuerte said there could even be a temporary increase in inflows if Filipino workers return home and bring back their savings.
“When workers come home from the Middle East because of conflict there, they would also bring home their hard-earned assets here. So, probably there will be a short-term increase in some of the flows,” he said. “But in the long run, there could be some impact.”
Tourism is another sector that may face headwinds, Villafuerte said, as Southeast Asia had already been experiencing weaker tourist arrivals even before the current conflict, partly due to stronger competition from Northeast Asian destinations such as Japan and South Korea.
He also cited slower global growth and weaker outbound travel from China as additional factors dampening tourism demand in the region.
“And before this conflict, we were already seeing weakness in tourism flows in Southeast Asia,” Villafuerte said, noting the combined effects of global economic conditions and competition from other travel destinations.
Despite the emerging risks, Villafuerte said the Philippines remains among the stronger-growing economies in the region.
“The Philippines is actually in the top group of economies growing 4.5 percent or above,” Villafuerte said. “They are quite robust under very challenging circumstances.”
He added that the country’s macroeconomic policy framework remains relatively strong, with monetary and fiscal authorities having experience managing external shocks. These policy tools, he said, could help the Philippines cushion the impact of global uncertainties.
