ADB sees subdued PH economic growth in 2026 due to Middle East crisis

Multilateral lender Asian Development Bank (ADB) expects the Philippines’ economic growth to be subdued this year, dragged by uncertainty and inflationary pressures arising from the ongoing war in the Middle East.

In the January edition of its flagship publication, Asian Development Outlook (ADO), the ADB projected that the country’s economy, as measured by gross domestic product (GDP)—the total value of goods and services produced in a country in a given period—will settle at 4.4% in 2026, lower than its December 2025 ADO forecast of 5.3%.

The Manila-based lender’s latest growth outlook, if realized, would mean that the economy will stagnate this year as the country’s GDP grew at the same rate of 4.4% in 2025.

“The Philippines is highly exposed given its heavy reliance on imported crude oil and refined oil products. Other transmission channels include possible disruption in remittances from overseas Filipinos, tighter financial conditions, and weaker investor and consumer sentiment,” the ADB said.

At a press briefing in Mandaluyong City on Friday, ADB Philippines country office senior economist Teresa Mendoza said that “growth will be subdued amid heightened uncertainty from the ongoing Middle East conflict.”

Mendoza clarified that the modest 4.4% GDP growth rate in 2026 only took into consideration that the Middle East conflict would be “short-lived” or would last until April or May.

“A prolonged conflict in the Middle East could intensify price pressures and dampen growth further,” she said.

“Severe weather events and delays in public investment could also weigh on growth,” she added.

The ADB is projecting the inflation rate to rise to 4% in 2026 due to higher global commodity prices.

Moreover, private consumption is expected to grow “moderately” this year as remittance inflows, which rose to $35.6 billion in 2025 (or equivalent to 7.3% of GDP), are expected to be affected by the Middle East conflict. 

The lender noted that the Middle East accounts for over 17% of total remittances in the Philippines, and “a prolonged conflict could affect overseas Filipino workers and household income.”

Meanwhile, investment is expected to recover as public infrastructure spending is seen to rebound under improved budget execution and project monitoring amid reforms being implemented following the flood control corruption scandal last year.

“The Philippine economy, with its heavy dependence on imported fuel, will face challenges from rising external risks,” said ADB Philippines country director Andrew Jeffries.

“What the current global conditions underscore is the need for sustained reforms especially in strengthening human capital, improving investment efficiency and the business environment, and protecting vulnerable households to ensure the country emerges unscathed and in a better growth position after the external shocks subside,” said Jeffries.—AOL, GMA News