Philippine growth seen slowing to 3.4% in 2026 amid inflation, weak investment

Upgrade to High-Speed Internet for only ₱1499/month!

Enjoy up to 100 Mbps fiber broadband, perfect for browsing, streaming, and gaming.

Visit Suniway.ph to learn

MANILA, Philippines — The Philippine economy is expected to slow in 2026 due to high inflation and subdued investment, Singapore-based economic think tank AMRO+3 said.

In its findings published on August 27, the think tank said that the Philippine economy is projected to slow sharply to 3.4% in 2026, down from 4.4% in 2025.

Despite the slowdown, the economy is expected to see a modest rebound to 4.8% in 2027.

AMRO Group Head and Lead Economist Jinho Choi noted that economic growth for the year would be dragged down by soft private consumption — driven by elevated inflation — as well as sluggish investment, though a second-half uptick in public construction and strong export performance are expected to offer some cushioning.

Risks

AMRO warned that the country's immediate economic outlook faces several threats, primarily driven by rising global energy prices that strain inflation, economic growth, and external balances.

The think tank added that severe weather, such as a strong El Niño, could damage agricultural output and drive up food costs, while any delay in the recovery of public investment risks deepening the ongoing economic slowdown.

"Over the medium term, structural challenges could pose greater obstacles to the economy's growth potential. Climate change and dependence on imported fossil fuels remain key vulnerabilities," AMRO said.

"Meanwhile, rapid AI adoption is intensifying competition in the IT-BPM sector, while also creating opportunities for the industry to expand into new and higher-value services," it added.

Flood control projects

AMRO mentioned that institutionalizing governance improvements in flood-control projects throughout the public investment cycle must be pursued to build long-term climate resilience and support economic recovery.

The think tank noted that properly governed infrastructure investments — particularly flood mitigation and energy security — will allow fiscal policy to cushion the economic slowdown while maintaining long-term stability alongside monetary, financial and structural reforms.

"Infrastructure priorities should include continuous strengthening of energy security through a more diversified energy mix and reliable power supply; ensuring that climate resilience initiatives are guided by measurable outcomes; and institutionalizing improvements in flood-control governance throughout the public investment cycle," AMRO said.

AMRO also advised that policymakers must strike a delicate balance between keeping inflation in check and sustaining economic growth.

To achieve this, the surveillance group recommended that fiscal authorities respond to the economic slowdown by reviving well-managed infrastructure spending while upholding medium-term fiscal discipline.

"Fiscal policy should remain responsive to cyclical downturns by restoring well-governed infrastructure investment, while maintaining a firm commitment to medium-term fiscal consolidation," AMRO said.

"Monetary policy should remain data-dependent. Further rate hikes would be warranted if core inflation remains elevated and persistent or inflation expectations show signs of becoming de-anchored," it added.