THE World Bank on Monday retained its 2026 growth forecast for the Philippines but lowered the outlook for next year given global and domestic challenges.
“The country right now is navigating some headwinds,” World Bank Division Director Zafer Mustafaoglu told an economic forum on Monday.
“The uncertainty around infrastructure procurement has made both public and private investors hesitant, just as rising global energy prices — a consequence of the ongoing conflict in the Middle East — have pushed up the cost of living for ordinary Filipinos,” he added.
The World Bank kept the 2026 outlook at 3.7 percent, near the bottom end of the government’s downwardly revised 3.5- to 4.5-percent target for the year.
The forecast for 2027 was cut to 5.2 percent from 5.4 percent with a further improvement to 5.5 percent in 2028 — both within the official 5.0- to 6.0-percent goal for the last two years of the Marcos administration.
World Bank Senior Country Economist Jaffar Al-Rikabi said the expected slowdown — growth was a below-target 4.4 percent in 2025 — reflected a combination of weaker investment, softer household consumption and elevated inflation, with a contraction in investment standing out as one of the main factors behind the deceleration over the past year and a half.
“From last year, we saw a fall in foreign direct investment on the back of heightened global policy and domestic uncertainty,” Al-Rikabi said.
“And that, combined with from the second half of last year and has carried on throughout this year, a slowdown in public investment,” he added.
Gross domestic product (GDP) growth slumped last year, falling well below the 5.5- to 6.5-percent target, due to a massive flood control project scandal that dragged down government spending and weighed on business and consumer spending.
Al-Rikabi noted that investments had accounted for a significant portion of the country’s growth over the past 15 years, with capital accumulation contributing around 90 percent.
The investment slowdown therefore presents a challenge not only to near-term growth but also to the country’s longer-term development ambitions, he added.
World Bank lead economist Gonzalo Varela said restoring investor confidence and improving the implementation of existing policies would be critical to getting the economy back onto a stronger growth path.
“It gets a little bit more difficult to keep growing once you reach upper-middle-income status,” he said.
“Some of the reforms that are slightly easier to process have been done already. So we need to make a little bit more of an effort,” he added.
The World Bank last month said that the Philippines had become an upper-middle-income economy after gross national income per capita hit $4,850 in 2025, reaching the $4,636 to $14,375 threshold.
Varela said the country’s development would depend increasingly on productivity, technology adoption, better jobs and stronger implementation of reforms, rather than investment alone.
The Philippines could achieve high-income country status by 2053 if it raises its potential economic growth rate to 6.8 percent through reforms that boost productivity, sustain investment and improve the allocation of resources.
The experience of other countries, Varela said, has shown that moving into the upper-middle-income group does not automatically lead to high-income status.
Of the 73 economies that moved into the upper-middle-income category over the past 40 years, 14 successfully transitioned to high-income status and remained there, he added.
Varela cited Brazil, Mexico and Malaysia as examples of economies that have stayed upper-middle-income for more than 30 years.
He also pointed to cases where countries managed to reach high-income status but later fell back because of major economic crises.
Argentina, for example, reached high-income status in 2014 before several crises pushed it back into the upper-middle-income category.
Sri Lanka similarly moved to the upper-middle-income category before a major economic crisis caused it to drop down to the lower-middle-income group.
“[R]egressions are possible, but they are more the exception rather than the rule,” Varela said.
“What we do see is that it is difficult to get out of this upper-middle-income country status.”
