World Bank cuts PHL growth forecast

The gloomy economic lay of the land in the Philippines has just been confirmed and validated by the World Bank.

It was announced this week that the World Bank Group (WBG) has lowered its 2026 growth forecast for the Philippines to 3.7 percent, still because of the global uncertainties caused by the war in West Asia.

In its June 2026 Global Economic Prospects (GEP) report released Thursday, the Washington-based WBG projected Philippine gross domestic product (GDP) growth to slow further this year from 4.4 percent in 2025 before recovering to 5.6 percent in both 2027 and 2028.

If realized, the WBG’s 2026 growth projection would mark the country’s weakest post-pandemic GDP expansion since the 2020 recession at the height of the most stringent Covid-19 lockdowns.

To recall, the Philippine economy expanded by merely 2.8 percent in the first quarter as delays in government infrastructure spending and lingering uncertainty wrought by the multibillion-peso flood-control corruption scandal weighed on both public and private consumption as well as local and foreign investor sentiment.

Meanwhile, the lender’s 2027 forecast falls within the government’s downscaled 5.5- to 6.5-percent growth target, while its 2028 projection is below the also downgraded six- to seven-percent goal.

Despite the regional shock from surging global oil prices, the WBG said economic activity across East Asia and Pacific (EAP) remained resilient in early 2026, with demand for artificial intelligence (AI)-related products supporting industrial production as well as export growth in several economies, including the Philippines.

However, financial conditions tightened across the EAP region following the outbreak of the conflict in the Middle East.

“Currencies depreciated, equity markets declined, and local-currency bond yields rose, especially in Indonesia, the Philippines, and Thailand, with only a partial recovery after the ceasefire,” the report noted. The Philippine peso fell to record-low levels closer to ₱62:$1 amid the prolonged war, while higher bond yields sought by domestic creditors made it more difficult for the government to borrow.

The WBG noted that most economies in EAP, including the Philippines, are net energy importers that depend heavily on Middle Eastern fuel supplies, making them vulnerable to prolonged disruptions in global markets.

It warned that fiscal positions in energy-importing economies like the Philippines and Thailand are likely to come under pressure from higher prices as well as conflict-related disruptions.