The Philippine economy is expected to grow slower this year as escalating tensions in the Middle East threaten to push up energy, transport, and consumer prices, according to the ASEAN+3 Macroeconomic Research Office.
In its latest interim forecast, AMRO lowered its Philippine gross domestic product growth projection for 2026 to 4.1 percent from its earlier estimate of 4.4 percent.
It also cut its 2027 growth forecast for the country to 5.5 percent from 5.8 percent.
“Growth is likely to moderate more sharply over the rest of the year as supply disruption and higher energy and industrial input costs weigh on broader economic activity,” AMRO said.
The downgrade comes after the Philippine economy grew by only 2.8 percent in the first quarter of 2026, sharply slower than the 5.4 percent expansion recorded in the same period last year. The first-quarter figure also fell short of the government’s full-year growth target of 5 to 6 percent.
AMRO said growth revisions across the region were uneven. Forecasts were raised for most Plus-3 economies, supported by the strong artificial intelligence-driven technology cycle, while some ASEAN economies, including the Philippines and Vietnam, saw downgrades due to stronger inflation pressures expected to weigh on domestic demand.
For the broader ASEAN+3 region, AMRO kept its 2026 growth forecast at 4.0 percent, unchanged from its projection in early April. However, it raised its inflation outlook to 1.8 percent from 1.4 percent due to more prolonged disruptions linked to the Middle East conflict.
“ASEAN+3 growth has remained resilient, supported by firm domestic demand and technology exports. But incipient signs of stress are emerging,” AMRO Chief Economist Dong He said.
“Higher energy and transport costs are feeding into inflation and adding pressure on industrial supply chains. If the conflict persists, these pressures could broaden and weigh on regional growth,” he added.
AMRO said the full impact of the Middle East conflict has yet to be felt, even as the region posted stronger-than-expected growth in the first quarter.
It warned that higher energy and industrial input costs, along with continued tariff uncertainty, could affect economies unevenly, with net energy importers and countries exposed to affected inputs facing stronger headwinds.
AMRO said the duration and severity of the Middle East conflict remain the most significant near-term risks to the regional outlook.
Under an adverse scenario where oil prices average $125 per barrel in 2026, compared with the baseline assumption of $95 per barrel, and supply disruptions worsen further, ASEAN+3 growth could slow to 2.5 percent while inflation could climb to 3.5 percent.
AMRO said that, excluding the COVID-19 pandemic years, such a scenario would mark the region’s highest inflation in more than a decade and its slowest growth since the Asian Financial Crisis.