By Eileen Mencias
The Asian Development Bank (ADB) has slashed its 2026 economic growth forecast for the Philippines to 3.8% and sharply raised its inflation outlook, warning of severe headwinds from delayed investments and surging commodity costs.
In its Asian Development Outlook July 2026 report, the Manila-based lender cut the country’s gross domestic product (GDP) forecast from the 4.4% projected in April. It also trimmed its 2027 growth projection to 5.3% from 5.5%.
The ADB said the downgrade reflected “delayed investments, softer private consumption amid higher commodity prices and climate-related risks.”
The revised figures place the Philippines below developing Southeast Asia’s projected average growth of 4.6% for 2026. The country lags significantly behind Vietnam, which is expected to expand by 7.2%.
Elsewhere in the region, the ADB maintained Indonesia’s outlook at 5.2% and Malaysia’s at 4.6%, while lowering Cambodia’s to 4.1%. Thailand is projected to grow by 1.8%.
Inflation poses an escalating threat to the Philippine economy. The ADB raised its Philippine inflation forecast by 1.9 percentage points to 5.9% for this year. This represents the largest upward revision among major Southeast Asian economies.
The revised forecast is the third highest in the region, surpassed only by Myanmar and Laos, where inflation is projected at 24% and 9.8%, respectively.
For developing Southeast Asia as a whole, the ADB raised its 2026 inflation forecast to 3.9% from 3.2%, and its 2027 outlook to 2.9% from 2.8%.
The multilateral lender noted that geopolitical tensions have severely impacted global supply chains.
The ADB said the 2026 Middle East conflict “created the largest oil supply disruption ever recorded,” though it noted that high inventories, emergency stock releases, alternative shipping routes, higher non-Middle East output, and weaker demand prevented oil prices from hitting extreme historic levels.
However, the multilateral lender warned that prolonged disruptions and eventual inventory rebuilding could keep energy markets tight and prices elevated.
The ADB emphasized that the price pressures extend beyond fuel.
“The inflationary impact of the Middle East conflict extends well beyond higher oil prices,” the ADB said, citing disrupted shipping routes, longer delivery times, higher freight costs, and shortages of critical inputs.
According to the lender, these pressures have triggered stockpiling and higher import prices that are feeding into producer and consumer prices across Asia. The bank warned this “could keep inflation elevated for many months, even after energy markets begin to stabilize.”
The ADB concluded that a re-escalation of the Middle East conflict, prolonged energy market uncertainty, new tariffs, and elevated trade policy uncertainty remain the primary risks to the regional economic outlook.
