Central Visayas economic growth faces mounting headwinds

CEBU, Philippines — Central Visayas’ economic expansion is likely to face mounting headwinds in the remainder of 2026 as inflationary pressures, geopolitical tensions and climate-related risks threaten to dampen investments, construction and consumer spending, according to the Department of Economy, Planning and Development (DEPDev).

The regional planning agency said the economy remains vulnerable to higher transport and energy costs, particularly as the region relies heavily on inter-island and imported food shipments.

Rising freight expenses could push up retail prices of rice and other essential commodities, adding to inflationary pressures already weighing on households and businesses.

In its latest report, the agency also warned that warmer temperatures associated with a possible El Niño episode may increase electricity demand and strain power facilities, raising the risk of unscheduled outages. Supply constraints could also trigger higher prices in the Wholesale Electricity Spot Market (WESM), leading to increased electricity rates for consumers and industries.

Investment activity may moderate as continued depreciation of the peso raises debt-servicing costs for companies with foreign currency obligations and increases the cost of imported machinery and raw materials.

According to the report, elevated inflation may also encourage investors to delay expansion plans while awaiting further signals from the Bangko Sentral ng Pilipinas (BSP) on the direction of interest rates.

Construction activity, a major driver of regional growth in recent years, is also expected to slow amid rising material costs linked to the escalating conflict between Israel and Iran and uncertainty in global commodity markets.

Higher prices of steel and cement, coupled with the prospect of tighter financial conditions, may cause investors to become more cautious in pursuing capital-intensive projects.

The labor market outlook remains mixed. DEPDev-7 said tourism-related industries are expected to receive a boost from major events, including the 48th ASEAN Summit, while manufacturers could benefit from improved external demand following a U.S. Supreme Court ruling that declared unconstitutional President Donald Trump’s use of emergency powers to impose global tariffs.

However, employment risks remain elevated as construction hiring may stay subdued and underemployment could worsen due to the lingering effects of geopolitical tensions and higher production costs.

Foreign trade also faces significant uncertainties. Higher oil prices resulting from the Middle East conflict may increase shipping and logistics costs, affecting export competitiveness.

At the same time, the weaker peso could provide some relief to exporters in electronics, shipbuilding and manufacturing by increasing peso-denominated earnings, even as it raises the cost of imported fuel and production inputs.

Domestic and retail trade are expected to encounter increasing pressure from rising fuel prices and logistics expenses, which could slow commodity movement and constrain household spending.

Businesses may also face higher operating costs, potentially dampening consumer demand across the region.

Agriculture remains vulnerable to the possible onset of El Niño conditions, which could reduce output and strain water resources. The region’s dependence on fertilizer inputs sourced from the Persian Gulf also exposes farmers to supply disruptions and price spikes stemming from geopolitical tensions.

Despite the risks, tourism remains a bright spot for Central Visayas. Industry players expect stronger growth in the second half of the year, supported by the planned opening of major venues in Cebu, including the SMX Seaside Cebu Arena and the SMX Convention Center Cebu, which are expected to strengthen the region’s meetings, incentives, conferences and exhibitions (MICE) industry.

In Bohol, authorities are banking on tourism product diversification to sustain growth, with initiatives focused on geotourism circuits, gastronomy, culture and heritage trails, as well as community-based and regenerative tourism programs. The province is also expanding its MICE offerings and tapping influencers to broaden its visitor markets.

The outlook emphasized the delicate balance facing Central Visayas’ economy, where tourism-led optimism is increasingly being tested by inflation, energy security concerns and a volatile global environment. — (FREEMAN)