AMRO cuts Philippines growth forecasts

MANILA, Philippines — The Association of Southeast Asian Nations Plus 3 (ASEAN+3) Macroeconomic Research Office (AMRO) has downgraded its growth forecasts for the Philippines for this year and next, as it expects higher inflation from the prolonged Middle East conflict to dampen economic activity.

An interim update to its regional economic outlook released yesterday showed that AMRO now expects the Philippine economy to grow by just 4.1 percent this year, lower than the 5.3 percent growth forecast it provided last April.

The new forecast is also slower than the 4.4 percent growth posted in 2025 and below the government’s five to six percent growth target for the year.

AMRO also trimmed its 2027 gross domestic product (GDP) growth forecast to 5.5 percent, from 5.8 percent previously.

This new forecast is at the lower end of the government’s 5.5 to 6.5 percent GDP growth goal for 2027.

First quarter economic growth slowed to 2.8 percent from the previous quarter’s three percent as the flood control controversy and rising prices triggered by tensions in the Middle East led to softer consumption and lower investments.

The first quarter outturn was also the slowest growth performance since early 2021.

“ASEAN growth has been downgraded in some economies, including the Philippines and Vietnam, where stronger inflation pass-through is expected to weigh on domestic demand,” AMRO said.

It now expects inflation in the Philippines to reach six percent this year, higher than its previous forecast of 3.9 percent.

For next year, it expects inflation to reach 4.1 percent, also higher than its previous projection of 3.6 percent for 2027.

Inflation rose to 7.2 percent in April, the highest in over three years, as the Middle East conflict pushed up costs.

Average inflation from January to April stood at 3.9 percent, within the government’s two to four percent target.

In terms of the regional outlook, AMRO maintained its growth forecasts for ASEAN+3 at four percent for this year and next year.

However, AMRO raised its 2026 inflation forecast for the region to 1.8 percent from its previous projection of 1.4 percent.

For next year, it expects inflation in ASEAN+3 to ease to 1.5 percent, unchanged from the forecast it provided last April.

While ASEAN+3 growth has remained resilient due to firm domestic demand and technology exports, AMRO chief economist Dong He flagged early signs of stress on the economy.

“Higher energy and transport costs are feeding into inflation and adding pressure on industrial supply chains. If the conflict persists, these pressures could broaden and weigh on regional growth,” he said.

He said that the duration and severity of the Middle East conflict continue to pose risks to the outlook.

AMRO sees ASEAN+3 growth slowing to 2.5 percent and inflation rising to 3.5 percent under an adverse scenario of oil prices averaging $125 per barrel this year compared with the baseline assumption of $95 per barrel, as well as further supply disruptions.

Excluding the COVID-19 pandemic years, this would mark the highest regional inflation in over a decade and the slowest growth since the Asian financial crisis.

“Against this backdrop, policy responses need to remain agile as the shock evolves,” He said.

“Near-term support should be targeted and temporary, while longer-term efforts should focus on strengthening energy security, supply-chain resilience and regional integration,” he added.