THE Asean+3 Macroeconomic Research Office (AMRO) has further lowered its growth forecasts for the Philippines, citing the impact of higher oil prices, rising inflation and domestic headwinds.
In an update to its regional economic outlook, AMRO said the country was likely to grow by just 3.3 percent this year, down from 3.4 percent in August and 4.1 percent two months earlier and below the government’s 3.5- to 4.5-percent target for 2026.
The forecast for 2027 was also slashed to 4.6 percent from 5.5 percent, again below the 2027-2030 goal of 5.0 percent to 6.0 percent.
“The Philippines is one of the economies that was hit harder by the energy shock,” AMRO Chief Economist Dong He said during the launch of the updated Asean+3 Regional Economic Outlook (AREO).
He acknowledged the government’s response to the shock, including the declaration of a national energy emergency, but noted that economic growth had still slowed significantly while inflation accelerated.
The economy grew by just 2.3 percent in the second quarter, the slowest annual pace since the pandemic, due to the outbreak of war in the Middle East and the lingering impact of last year’s corruption scandal.
He said that the Bangko Sentral ng Pilipinas (BSP) had also actively responded by raising interest rates, but inflation — which peaked at 7.2 percent in April and has since eased to 6.1 percent in August — remains above the central bank’s 2.0- to 4.0-percent target range.
The central bank’s policymaking Monetary Board has so far raised key interest rates thrice this year, with the benchmark rate currently at 5.0 percent. With inflation threatening to resume rising — September data will be released today — the BSP could again raise rates on Oct. 22.
AMRO continues to expect inflation to exceed target, averaging 5.6 percent this year before slowing to 4.6 percent in 2027, potentially dragging on growth.
Keeping inflation under control remains crucial as elevated prices continue eroding household purchasing power and weigh on growth.
“It’s a very challenging task for the central bank, because on the one hand, inflation is going up and on the other hand, growth is slowing down,” He said.
Further monetary tightening could have a dampening effect on economic activity although this may be necessary to prevent prices from becoming a more persistent drag.
The Philippines, He continued, also has “some domestic issues” that it has to deal with.
Policy frameworks should be used effectively to address these challenges while ensuring that public investment resumes at a pace consistent with the government’s development objectives, He added.
“[T]he growth outlook is very dependent on how fast public investment and construction related activities can pick up,” the AMRO economist said.
“That’s very important for the Philippines economy to come back to its potential growth.”
