The Asian Development Bank (ADB) has further downgraded the economic outlook for its host country, the Philippines, citing lingering risks from the Middle East conflict and its impact on global energy prices.

In the July edition of the Asian Development Outlook (ADO), the multilateral lender lowered its forecast for Philippine gross domestic product (GDP) growth in 2026 to 3.8 percent from 4.4 percent in its April ADO.

“The 2026 forecast for developing Southeast Asia is trimmed following downward revisions for Cambodia and the Philippines as higher energy prices weigh on domestic demand and tourism,” ADB said.

ADB’s 0.6-percentage-point reduction in the Philippine growth forecast was the largest downgrade among the economies covered by the ADO. The lender also raised its 2026 inflation forecast for the Philippines to 5.9 percent, reflecting the impact of higher energy costs linked to the Middle East conflict. The revised projection is nearly four times the inflation rate recorded at the end of 2025.

“For 2026, the largest upward revisions are for the Philippines, up by 1.9 percentage points to 5.9 percent, followed by Cambodia, up by 1.7 percentage points to 4.5 percent, and Thailand, up by 1.6 percentage points to 2.9 percent,” ADB said.

ADB attributed the revisions to the risk of further oil supply disruptions in the Middle East. It noted, however, that ample supply-side buffers and coordinated emergency stock releases have helped cushion the impact and prevented global oil prices from reaching the extreme levels seen during previous oil shocks.

Meanwhile, the International Monetary Fund (IMF) also revised its outlook for the Philippines. In its July update of the World Economic Outlook, the IMF lowered its 2026 GDP growth forecast for the country to 3.9 percent from 4.1 percent previously.

“The possibility of second-round effects of higher energy prices has raised expected policy rate paths through 2026, despite crude oil prices falling from earlier highs,” the IMF said.

Economic growth continued to weaken at the start of 2026, with GDP expanding by just 2.8 percent in the first quarter. The slowdown reflected the lingering effects of last year’s flood control corruption scandal, compounded by the onset of the energy shock in March.