Philippine economic growth could drop to as low as 1.4 percent in the second quarter as the Middle East conflict continues to weigh on the domestic economy, according to risk management consulting firm PSA Intelligence.

In a report, the Makati-based firm projected second-quarter gross domestic product (GDP) growth of 1.42 percent to 4.07 percent, with full-year expansion reaching 3.5 percent to 4.5 percent.

The firm said the conflict has kept global oil prices volatile, fueling inflation and disrupting supply chains in the Philippines, which relies entirely on imported crude oil.

“Since February 2026, oil shipments through the Strait of Hormuz have been cut to an estimated 15 percent of pre-conflict levels, while crude oil prices remain volatile,” it said.

PSA Intelligence expects fuel prices to remain elevated and supply chain disruptions to persist through the year, although it said the likelihood of a prolonged conflict could diminish ahead of the US midterm elections and as global weapons stockpiles decline.

The consultancy said the Gulf conflict had already weighed on economic activity. GDP expanded 2.6 percent in the first quarter, which the government attributed to the national energy emergency and weaker infrastructure spending following the flood control scandal.

“Weaker household consumption and a slowdown in physical infrastructure investment led to slower economic growth in the first half of 2026,” the report said.