Asian Development Bank Principal Economics Officer Teresa Mendoza speaks during a briefing at the ADB headquarters in Mandaluyong City on Friday (April 10, 2026). She said Philippine economic growth is projected at 4.4 percent this year, as the Middle East conflict weighs on the country’s outlook. (PNA photo by Anna Leah Gonzales)
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The Asian Development Bank has lowered its growth forecast for the Philippines, warning that the worsening conflict in the Middle East is creating fresh risks for the country and the wider Asia-Pacific region.
In its April 2026 Asian Development Outlook released on Friday, the ADB trimmed its Philippine gross domestic product growth projection for 2026 to 4.4 percent, down from its earlier estimate of 5.3 percent. Growth is expected to improve to 5.5 percent in 2027, but the bank said the near-term outlook has been tempered by rising external uncertainty and the economy’s vulnerability to higher global oil prices.
The multilateral lender said domestic demand will remain the main engine of Philippine growth, although momentum is likely to be softer as businesses turn more cautious and consumers face growing pressure from higher prices. The report noted that uncertainty linked to developments in the Middle East could weigh on confidence, tighten financial conditions, and threaten remittance flows from overseas Filipinos in the region, even as these remittances are expected to recover once conditions stabilize.
ADB Philippines Country Director Andrew Jeffries said the country’s heavy dependence on imported fuel leaves it exposed to mounting global risks, particularly at a time when energy markets have turned volatile.
That vulnerability has already begun feeding into inflation, with the bank projecting price growth to accelerate to 4 percent in 2026 from 1.7 percent in 2025 before easing to 3.5 percent in 2027.
While inflation averaged a relatively manageable 2.2 percent in the first two months of 2026, the ADB said price pressures spiked in March following the escalation of the Middle East conflict. ADB Principal Economics Officer Teresa Mendoza said the impact of higher global crude prices was quickly transmitted to local fuel costs because of the Philippines’ reliance on imported oil.
To soften the blow, the government has rolled out targeted assistance programs, including fuel and cash subsidies for vulnerable sectors such as farmers, fisherfolk, and public transport drivers. Authorities have also been working to diversify supply sources by securing oil imports from outside the Middle East.
Despite the downgrade, the ADB said there are still grounds for optimism. It pointed to a range of structural reforms that could help attract more foreign investment, including amendments to the Foreign Investors’ Long-Term Lease Act, the Open Access in Data Transmission Act, the CREATE MORE Act, and green lane initiatives. The bank said the full benefits of these measures will depend on consistent implementation and continued improvements in regulatory efficiency.
Public infrastructure spending is also expected to recover as budget execution improves, while the government’s fiscal strategy remains anchored on medium-term consolidation.
Beyond the immediate risks, the ADB said the Philippines must keep pushing long-term reforms to sustain inclusive growth. Mendoza stressed the need to strengthen education quality, expand lifelong learning opportunities, improve nutrition, and deepen collaboration with the private sector.
She said current global conditions highlight the urgency of investing in human capital, improving investment efficiency, strengthening the business environment, and protecting vulnerable households from external shocks.
She also underscored the importance of deeper regional cooperation, saying stronger and more diversified supply chains, as well as closer engagement with neighboring economies, could help support cross-border trade, capital flows, and investment during a period of heightened uncertainty.
The ADB said the Philippines is not alone in facing a weaker outlook. Across developing Asia and the Pacific, growth is expected to slow in both 2026 and 2027 despite resilient consumer demand and continued strength in demand for artificial intelligence-related goods.
China’s economy is projected to expand by 4.6 percent in 2026 and 4.5 percent in 2027, down from 5 percent in 2025, as it continues to grapple with a weak property sector and slowing exports. India, meanwhile, is expected to post 6.9 percent growth this year, lower than 7.6 percent in 2025, before accelerating to 7.3 percent in 2027 on the back of solid domestic consumption.
Pacific economies are seen posting the sharpest slowdown, with growth easing from 4.2 percent in 2025 to 3.4 percent in 2026 and 3.2 percent in 2027.
Regional inflation, after easing in 2025, is forecast to climb to 3.6 percent this year as higher energy prices ripple through economies across the region.
ADB Senior Economist Jaqueson Galimberti said the recently announced two-week ceasefire offers a measure of hope, but warned that the situation remains fragile. He said that if disruptions in energy markets persist into early next year, regional growth across 2026 and 2027 could end up 1.3 percentage points lower, while inflation could be 3.2 percentage points higher.
He added that risks are being compounded by potential tariff shocks from the United States and tighter global financial conditions.
For the Philippines, the message is clear: while domestic reforms and public spending can provide support, the country’s economic path this year will still depend heavily on how long external tensions last and how effectively it can shield itself from the fallout.
