THE Philippine economy could grow by just 3.1 percent in the first quarter due to the war in the Middle East, the University of Asia and the Pacific (UA&P) said on Wednesday.
“The ‘green shoots’ in economic data that we saw last month have just withered with the escalating Iran war,” the UA&P said in its latest Market Call report.
The 3.1-percent outlook — lowered from 3.3 percent a month ago — is still an improvement from the 3.0 percent seen in the last three months of 2025 but is markedly below the government’s downwardly revised 5.0- to 6.0-percent target for 2026.
In February, the UA&P based its optimism on improved manufacturing conditions, higher remittances and exports and consumer activity likely to pick up amid a weak peso and within-target inflation.
On Wednesday, it said: “The latest economic figures, especially the decline in the number of employed people in January — even before the Iran conflict — suggest that GDP growth for Q1 2026 will remain weak.”
A “rebound in the following quarters,” however, was forecast, particularly in the second half, with growth projected to hit more than 5.0 percent “as infrastructure spending gains traction.”
UA&P economists also said the war in the Middle East could push inflation to 4.2 percent this month, above the 2.0- to 4.0-percent target.
“Inflation will rise to 4.2 percent in March and may increase further until oil prices stabilize, as producers respond to high prices and Iran-US cooperation improves tanker passage,” it said.
Price data for the month will be released on April 7, while preliminary first-quarter results will be released on May 7.
The UA&P said exports were likely to be a “bright spot,” growing by double digits, but the peso could stay above P59 to the dollar due to higher inflation and increased demand for foreign currency assets as a hedge against risks.
Bond yields, meanwhile, are expected to be influenced by oil price volatility, while the Philippine Stock Exchange index was forecast to trade in the 5,900 to 6,200 range with risks tilted to the downside.
