THE Asean+3 Macroeconomic Research Office has lowered its 2026 growth forecast for the Philippines with the country expected to post one of the steepest inflation increases in the region.
In an interim update to its regional economic outlook, the Singapore-based macroeconomic surveillance organization said it now expected the Philippines to grow by just 4.1 percent this year instead of 5.3 percent previously.
The forecast for 2027 was also cut to 5.5 percent from 5.8 percent.
The 2026 outlook, if realized, means a slowdown from last year’s 4.4-percent result. It is also markedly lower than the government’s 5.0- to 6.0-percent target for the year.
“Asean growth has been downgraded in some economies, including the Philippines and Vietnam, where stronger inflation pass-through is expected to weigh on domestic demand,” AMRO said.
It now expects inflation to average 6.0 percent this year, markedly higher than the previous projection of 3.9 percent and well above the official goal of 2.0 percent to 4.0 percent.
The rate is also expected to remain above target at 4.1 percent — raised from 3.6 percent — in 2027.
AMRO said the Philippines was among the most vulnerable to the inflationary effects of higher energy costs caused by the war in the Middle East.
“Higher energy and transport costs are feeding into inflation and adding pressure on industrial supply chains,” AMRO chief economist Dong He said in a statement.
“If the conflict persists, these pressures could broaden and weigh on regional growth,” he added.
AMRO noted that members of the Association of Southeast Asian Nations were generally facing greater inflationary pressure than their Northeast Asian counterparts because of a heavier reliance on imported energy and the larger share of food in household consumption baskets.
For the Philippines, the challenge is particularly significant because fuel and transportation costs have broad spillover effects throughout the economy.
Rising fuel prices increase operating costs for manufacturers, retailers, farmers and logistics providers, which are often passed on to consumers.
The growth forecasts Asean were maintained at 4.6 percent and 4.8 percent for 2026 and 2027, respectively, but inflation was projected to average 4.0 percent this year, significantly higher than the 3.1-percent forecast published in April, and then ease to 3.2 percent next year — up from 2.9 percent previously.
The outlooks for the wider Asean+3, which includes China, Hong Kong, South Korea and Japan, were kept at 4.0 percent for both years with regard to economic growth. Inflation is expected to hit 1.8 percent, instead of 1.4 percent, this year while the 2027 projection was kept at 1.5 percent.
AMRO’s baseline scenario assumes disruptions to the Strait of Hormuz gradually ease in the second half of this year, allowing oil prices and energy supply chains to normalize. It warned, however, that a more severe scenario could have substantial consequences for the region.
If Brent crude averages $125 per barrel throughout the year and disruptions to industrial inputs become more prolonged, Asean+3 economic growth could slow to just 2.5 percent while inflation could rise to 3.5 percent.
Such an outcome would represent the region’s slowest growth since the Asian Financial Crisis, excluding the pandemic years, and its highest inflation in more than a decade.
“Against this backdrop, policy responses need to remain agile as the shock evolves,” He said.
“Near-term support should be targeted and temporary, while longer-term efforts should focus on strengthening energy security, supply chain resilience and regional integration.”
