Philippine growth seen slowing to 3.4% in 2026 amid inflation, weak investment

The Philippine economy is projected to slow to 3.4% growth in 2026, according to Singapore-based think tank AMRO+3. This slowdown comes as a result of high inflation and reduced private investment. Despite the anticipated decline, the economy is expected to recover modestly in 2027, reaching 4.8% growth. Private consumption is expected to be a key drag on growth, primarily due to rising inflation, while investment is also projected to remain sluggish.

However, a potential rebound in public construction during the second half of the year and robust export performance may provide some relief. The immediate outlook for the Philippine economy faces several significant challenges, including surging global energy prices, which are driving up inflation and negatively impacting growth and external balances.

Severe weather events, such as a strong El Niño, could also damage agricultural output and contribute to higher food costs, further exacerbating the economic slowdown. In the medium term, structural issues such as climate change and reliance on imported fossil fuels pose additional obstacles to the economy's growth potential. AMRO+3 warns that addressing these vulnerabilities is crucial for long-term stability and sustainable economic recovery.

To support long-term resilience, the think tank emphasizes the need for properly governed infrastructure investments, particularly in flood mitigation and energy security. Policymakers are advised to strike a balance between managing inflation while sustaining economic growth. This can be achieved by reviving well-managed infrastructure spending while maintaining medium-term fiscal discipline.

Additionally, monetary policy should remain data-dependent, with further interest rate hikes warranted if core inflation remains elevated and inflation expectations become de-anchored.