High food, energy prices to weigh on Philippines growth

IMF says Philippines to trail Asean peers in 2026

MANILA, Philippines — The Philippine economy is expected to book slower growth than most major Southeast Asian peers this year as high food and energy prices weigh on activity, before staging a stronger rebound in 2027, according to the International Monetary Fund (IMF).

In its October World Economic Outlook (WEO), the IMF kept its Philippine gross domestic product growth forecast at 3.4 percent for 2026 before accelerating to 5.1 percent next year. GDP measures the total value of goods and services produced in the economy.

The 2026 forecast puts the Philippines behind Vietnam, which is seen growing by 8.4 percent, Malaysia at 5.2 percent, Indonesia at 5.1 percent and Singapore at five percent. Only Thailand, with projected growth of 2.1 percent, is expected to expand more slowly among the major economies in the Association of Southeast Asian Nations (ASEAN).

By 2027, however, Philippine growth is expected to recover to 5.1 percent, matching Indonesia and outpacing Malaysia at 4.6 percent, Singapore at three percent and Thailand at 2.1 percent. Vietnam is still projected to lead the group with 7.5-percent growth.

The IMF expects the broader ASEAN-5 grouping, composed of Indonesia, Malaysia, the Philippines, Singapore and Thailand, to grow by 4.4 percent this year and 4.3 percent in 2027.

An IMF spokesperson said the Philippines’ rebound next year would reflect the economy’s still-elevated growth potential, although the projected pace would remain below that potential.

“This is a robust recovery – thanks to the still elevated Philippines growth potential – which allow Philippines to maintain a relatively strong pace compared with many ASEAN peers next year,” the spokesperson said.

The IMF said a gradual rebound in investment as confidence improves and the effects of the energy shock ease would drive the recovery.

However, the Philippines also stands out in the region for relatively high inflation.

The IMF expects Philippine inflation to average 5.6 percent this year, compared with 4.7 percent in Vietnam, 3.3 percent in Indonesia, 2.3 percent in Singapore, 2.2 percent in Malaysia and 2.1 percent in Thailand.

According to the IMF, the Philippines is particularly exposed to food and energy shocks because of its reliance on imported fuel and the relatively large share of food in household spending.

“Rice alone accounts for about 10 percent of the overall consumer basket, and considerably more for poorer households,” the IMF spokesperson said.

The IMF said higher energy prices have quickly fed into transport and electricity costs, while rising rice prices and weather-related disruptions have added to food inflation.

The government’s response has appropriately focused on targeted and temporary support for vulnerable households and affected businesses while largely allowing domestic energy prices to reflect higher international fuel costs, the IMF said.

“This helps cushion the impact of the shock without distorting energy saving incentives,” the spokesperson said.

The combination of weaker growth and elevated inflation also complicates the job of the Bangko Sentral ng Pilipinas, which must prevent temporary price shocks from becoming persistent without placing unnecessary pressure on economic activity.

With inflation expectations still broadly anchored and substantial spare capacity in the economy, the IMF said additional monetary tightening should depend on whether inflation pressures persist or second-round effects become stronger.

Over the longer term, the IMF said improving food and energy security would be important in reducing the Philippines’ vulnerability to similar shocks.

The IMF expects global growth to slow to 3.1 percent in 2026 from 3.5 percent last year before improving to 3.4 percent in 2027.

The Fund said the global outlook remains uneven, with higher energy costs from the Middle East conflict weighing on some economies even as artificial intelligence-related investment and technology trade support others.