The World Bank on Monday kept its 2026 growth projection for the Philippines at 3.7%, while cautioning that the economy's rebound next year is likely to be more subdued than earlier anticipated.
"Growth is set to decelerate in 2026 on the back of weak investment, constrained consumption and sustainability," Zafer Mustafaoglu, division director for the Philippines, Malaysia and Brunei at the World Bank, said at an economic forum in Manila.
The 3.7% forecast sits slightly below the 4.1% average growth the World Bank expects for developing economies in East Asia and the Pacific, Mustafaoglu added.
Looking further ahead, the World Bank expects gross domestic product growth to rebound to 5.2% in 2027 - a downward revision from the 5.6% outlook published in June - and to reach 5.5% in 2028. The institution attributed the anticipated pickup to a gradual recovery in public investment and improving economic conditions.
Domestically, the Philippine government's economic managers have set a growth target of 3.5% to 4.5% for this year. That range was lowered in light of the Middle East crisis and an infrastructure-related corruption scandal that slowed government spending, the World Bank noted.
Economic activity expanded by 2.8% in the first quarter, a result the report described as below expectations. The World Bank cited the impact of the Middle East conflict and a delayed budget passage as weighing on growth in that period.
On prices, Mustafaoglu said the World Bank sees inflation averaging 5.8% for the year, which is below the 6% to 7% projection from the government's economic managers. The bank projects average inflation to ease to 5.2% in 2027, assuming governance conditions stabilise, public investment recovers and the central bank resumes monetary easing.
The World Bank also pointed to currency developments as a factor in price behaviour. It said the depreciation of the Philippine peso has fuelled inflation by keeping import costs high and delaying a slowdown in the pace of price increases.
Separately, the government's economic managers had earlier indicated expectations for the peso to trade in a 60 to 62 per dollar range for the 2026-2030 period.
Clear summary
The World Bank preserved its 2026 Philippine growth forecast at 3.7% and warned of a slower-than-expected recovery next year due to weak investment, constrained consumption and sustainability concerns. The bank expects growth to strengthen to 5.2% in 2027 and 5.5% in 2028 as public investment rebounds, while inflation is forecast to average 5.8% this year and ease to 5.2% in 2027. Peso depreciation has contributed to higher import costs and sustained inflationary pressure.
Key points
- World Bank holds 2026 growth forecast for the Philippines at 3.7%, below the 4.1% regional average for developing East Asia and the Pacific.
- Growth is projected to pick up to 5.2% in 2027 and 5.5% in 2028 as public investment gradually recovers and economic conditions improve.
- Inflation is expected to average 5.8% this year and ease to 5.2% in 2027; peso depreciation has kept import costs high and slowed the decline in inflation.
Sectors impacted
- Public investment and infrastructure - slower government spending has weighed on near-term growth.
- Trade and imports - currency depreciation raises import costs, affecting inflation and trade margins.
- Household consumption - constrained consumption is cited as a drag on growth.
Risks and uncertainties
- Weak private investment - the World Bank identifies weak investment as a primary factor slowing the 2026 recovery, which can constrain growth across manufacturing, construction and logistics sectors.
- Compressed consumption and governance issues - constrained consumer spending and governance-related slowdowns in public investment increase downside risk to near-term activity.
- Currency-driven inflation - the peso's depreciation has fuelled higher import costs and delayed disinflation, creating uncertainty for monetary policy and real incomes.