The ASEAN+3 Macroeconomic Research Office (AMRO) has sharply revised its 2026 gross domestic product (GDP) and inflation forecasts amid persistent domestic and international headwinds.

In its preliminary assessment following its annual consultation visit to the Philippines, AMRO projected economic growth at 3.4 percent in 2026, a 0.7-percentage-point reduction from its June forecast.

“The Philippine economy is expected to grow by 3.4 percent in 2026, down from 4.4 percent in 2025, before rebounding to 4.8 percent in 2027,” AMRO Group head and lead economist Jinho Choi said.

“Growth this year will be weighed down by weaker private consumption amid higher inflation and subdued investment, although a gradual recovery in public construction in the second half of the year and resilient exports should provide some support,” he added.

Growth decline for four consecutive quarters

GDP growth has slumped for four consecutive quarters, which the government has attributed to persistent slowdowns in infrastructure investment following the onset of last year’s flood control scandal, combined with the onset of the national energy emergency.

AMRO identified higher global energy prices resulting from shipping disruptions in the Middle East as the most immediate macroeconomic risk, with potential effects on inflation, growth and the country’s external position.

Choi added that extreme weather, including the possibility of a very strong El Niño, could also disrupt agricultural production and raise food prices.

A slower-than-expected recovery in public investment could further weaken growth and prolong the downturn.

Growth decline but economy not underperforming

“In terms of decline in growth rate this year, I think the Philippines is probably one of the institutions that suffered the most from this round-off. But I don’t necessarily say that it’s underperforming,” AMRO chief economist Dong He added, attributing the ongoing growth slowdown to the country’s reliance on oil imports through the Strait of Hormuz, which has experienced massive disruptions due to the ongoing conflict between the US and Iran.

Conversely, AMRO cut its 2026 inflation forecast to 5.4 percent from its June forecast of 6.0 percent. Its latest forecast remains significantly higher than the end-2025 level of 1.7 percent.

“Partly, we also reflected a recent development in both headline and core inflation in July, so it’s touched down by 0.2 percentage points each in July. We don’t know whether this is a quick [decline] or it’s going to be a temporary modulation,” Choi said.

“In our prediction for global oil prices, we revised our previous outlook with some milder expectation on global oil prices. But as you know, it’s still very consistent in the development of the United States and other countries, and we are looking at the financial risks on the Super El Niño, or minimum wage hike in the operating model.”