The International Monetary Fund (IMF) has slashed its gross domestic product (GDP) forecasts for the Philippines in 2026 and 2027, citing delays in government catch-up spending, lingering effects of the Middle East conflict and the onset of a severe El Niño season.

IMF officials announced the revisions at a Friday press briefing held at the central bank’s Manila headquarters following its Article IV Consultation Mission in the country, part of the organization’s annual consultations with member countries.

“Growth is projected to slow to 3.4 percent in 2026 and recover to 5.1 percent in 2027 as the shocks fade and investment partly rebounds,” said IMF Philippine mission leader and chief of the Commodities Unit in the IMF’s Research Department Andrea Pescatori.

“The main external risks stem from a prolonged Middle East conflict, tighter global monetary conditions, and weaker remittances. Domestically, a weaker rebound in public investment and confidence and more frequent climate events would weigh on growth, while rising leverage and a prolonged property downturn pose financial stability risks,” he added.

The IMF previously estimated 2026 growth at 3.9 percent, while 2027 growth was earlier projected at 5.5 percent.

However, growth slowed to 2.3 percent in the second quarter, the lowest since 2009 excluding the pandemic, which the government attributed to further delays in public investment amid heightened scrutiny as probes into alleged anomalies in state spending linked to last year’s flood control scandal continue.

Pescatori said the second-quarter growth figures contributed to the fund’s downward revisions.

“Many of our conversations were pointing to a fast and strong rebound in public investment in the second half of 2026. And with that, also a fast recovery in business. We believe that didn’t happen or is not going to happen exactly in line as we predicted,” he said.

“So, the 2026 Q2 probably reflects some of the delays in the executions of public infrastructure spending and a more generalized, I would say, weaker business sector. And the energy shock has clearly contributed to the weakness in the business sector.”

DBM data

Latest data from the Department of Budget and Management (DBM) showed infrastructure outlays slid 28.1 percent in the first six months of the year, down P202.2 billion from the same period last year.

For June alone, infrastructure and other capital outlays were P98.0 billion, down 34.1 percent from P148.8 billion in June 2025. The DBM attributed the decline particularly to strengthened payment validation, audit and documentary safeguards affecting Department of Public Works and Highways infrastructure payments.

Subdued public investment

Pescatori said the downward revision for 2027 reflects the lingering Middle East conflict, higher oil and food prices, and subdued public investment as probes into the “floodgate” scandal continue.

He noted, however, that any rebound in public investment may be weaker than originally anticipated.

“[T]he rebound in public investment will actually not be full according to the most recent budget analysis. As I mentioned before, the government now envisages new numbers for public investment, which are lower than what we were used to see[ing] in the previous years,” he said.

“[T]he government has to replace it with PPP in the public-private projects in order to resolve this uncertainty on the execution of this. So, in that sense, we have also slightly maxed out the impact of public investment plus the complete projects.”