The Development Budget Coordination Committee (DBCC) has significantly reduced the Philippines’ economic growth target for 2026 amid mounting risks stemming from the conflict in the Middle East.

Under National Budget Memorandum No. 158, the DBCC cited the Gulf energy shock, weak business and investor confidence, and the upcoming El Niño season as key factors behind its decision to lower the country’s gross domestic product (GDP) growth target to 3.5 to 4.5 percent this year, down from the 5 to 6 percent range set late last year.

Cushion impact of economic slowdown

The committee noted, however, that recent government measures, including the Unified Package for Livelihoods, Industry, Food, and Transport, could help cushion the impact of the economic slowdown.

“Likewise, the accelerated implementation and timely completion of high-impact infrastructure projects and the Luzon Economic Corridor are expected to boost productivity and industrial growth, particularly in semiconductor manufacturing and construction,” it said.

GDP growth weakened sharply in the second half of 2025 following the outbreak of the flood control scandal.

Lowest rate since 2011

Investigations into allegedly anomalous infrastructure projects across the country, as well as subsequent developments implicating several prominent political figures, including the President, contributed to full-year growth slowing to 4.4 percent — the lowest rate since 2011, excluding the pandemic years.

The economy has now posted three consecutive quarters of slowing growth. In the first quarter of 2026, GDP expanded by a modest 2.8 percent as risks from the Middle East conflict compounded the lingering effects of the flood control scandal.