Moody’s trims Philippine growth outlook to 4.9 percent for 2026

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March 24, 2026 | 12:00am

MANILA, Philippines — Moody’s Analytics has downgraded its growth forecasts for the Philippines, citing weaker-than-expected domestic momentum, even as it expects the economy to recover gradually over the next three years.

Moody’s Analytics economist Sarah Tan said the research firm now expects Philippine gross domestic product (GDP) to grow by 4.9 percent in 2026 and 5.2 percent in 2027, lower than its previous projections of 5.1 percent and 5.4 percent, respectively. The 2028 forecast was kept at 5.3 percent.

“We have trimmed our growth forecasts slightly from the February baseline,” Tan said in an email. “The revision reflects a reassessment of domestic momentum after weaker-than-expected expansion in 2025, rather than any major change in our geopolitical assumptions.”

The updated forecasts place the Philippines below the government’s growth targets of five to six percent for 2026, 5.5 to 6.5 percent for 2027 and six to seven percent for 2028.

Despite the downgrade, Tan said the growth outlook remains anchored on domestic demand, particularly household spending.

“Growth is still expected to pick up in 2026, with the outlook still largely dependent on domestic demand. Private consumption should remain supported by stable labor market conditions and steady remittance inflows, with growth likely to stay moderate rather than show a sharp acceleration,” she said.

Investment is also expected to improve as the impact of earlier monetary easing from the Bangko Sentral ng Pilipinas (BSP) feeds into the economy, but sentiment will remain cautious due to ongoing corruption controversies.

On inflation, Moody’s Analytics projects price pressures to remain manageable but trending higher over the medium term, with inflation seen rising to 2.5 percent in 2026 and 3.1 percent in 2028.

Still, Tan warned that risks to the outlook are tilted to the downside, particularly from potential energy shocks.

“The Philippines is particularly vulnerable to an energy price shock as it is a net importer of fuel and many consumption goods, with more than half of its energy needs sourced from abroad and no meaningful strategic reserves, leaving the economy highly exposed to higher oil and food prices,” she said.

She noted that higher import costs could fuel inflation, widen the trade deficit and put pressure on the peso, which “could force the BSP to pause its easing cycle or even tighten policy if second-round effects emerge.”

Elevated prices could also dampen consumption and business activity.

“Higher electricity costs, already among the highest in the region, would further weigh on business activity and overall growth,” she added.

Despite these risks, Moody’s baseline scenario assumes that geopolitical tensions in the Middle East remain contained.

“In our baseline, we assume the Middle East conflict remains contained and ends soon, so the direct impact on Philippine growth should be limited,” Tan said.