The Asian Development Bank (ADB) signaled that it may again downgrade the country’s growth outlook as the prolonged Middle East conflict continues to pressure inflation, weaken economic activity, and expose the economy’s vulnerability to a depreciating peso.
Speaking to BusinessWorld, Andrew Jeffries, ADB country director for the Philippines, warned that its earlier projections were based on an “early stabilization scenario” that assumed the crisis would ease within months.
“When we did the Asian Development Outlook in very early April, it had several scenarios including more downside scenarios, but the main scenario was based on what I would call an early stabilization scenario,” Jeffries said.
He added the bank is now anticipating another possible downward revision in July after the Philippine economy posted slower-than-expected 2.8 percent growth in the first quarter.
“Just given the new numbers that have come out for the quarter that showed lower figure GDP, I guess we will be anticipating lower projections in July, given current trends,” he noted.
The lender mentioned that the country was being “disproportionately negatively affected” by the conflict-driven inflation surge compared to neighboring economies in the region.
Now, the Philippines is being disproportionately negatively affected compared to other countries; we just saw 7.2 percent inflation recently, so the Philippines is unfortunately experiencing that kind of much more downside quicker because of the vulnerability,” Jeffries explained.
The ADB earlier cut its gross domestic product growth forecast for 2026 to 4.4 percent from the 5.3 percent projected in December, placing it below the government’s 5-6 percent target range.
Meanwhile, Jesus Felipe, De La Salle University (DLSU) Carlos L. Tiu School of Economics Professor, said the continued depreciation of the peso could further strain an economy already struggling with weak production capacity.
“The problem is the type of economy that we have is a very weak economy… It is an economy that has problems really sustaining production capacity,” Felipe added during Money Talks with Cathy Yang via One News.
He expected the peso to weaken further to P63.5 against the dollar by August as elevated oil prices and rising import costs continued to pressure inflation and household incomes.
“In the end, what is going to happen is that in the short run, at the very least, the current account deficit is going to deteriorate,” he noted.
The professor stated the crisis should push the country to “diversify” the economy, strengthen local manufacturing, and improve export competitiveness to reduce dependence on imports and external shocks.
He warned that the country would remain “highly vulnerable” to future domestic and international crises despite eventual economic recovery, if there are no structural reforms.
Written by Ericko Malimban
Ericko Malimban is a dedicated campus journalist and contributor. Their insightful writing sparks meaningful conversations and keeps the community informed.
