S&P cuts Philippines growth outlook to 4.1% in 2026

MANILA, Philippines — S&P Global Ratings has sharply lowered its growth outlook for the Philippines this year as weak consumer demand, a prolonged pullback in infrastructure spending and elevated energy prices weigh on economic activity.

In a report, S&P said it now expects the Philippine economy to grow by only 4.1 percent this year, down from its previous forecast of 5.8 percent.

This was the steepest downward revision among the Asia-Pacific economies covered by the debt watcher. It also marks a slowdown from the 4.4-percent expansion recorded in 2025.

“We have a large downward growth forecast revision for the Philippines as several headwinds are working to dampen economic momentum,” Vishrut Rana, senior economist at S&P Global Ratings, said in an email.

Rana said the pullback in public infrastructure spending has remained “sharp and prolonged,” citing data from the Department of Budget and Management showing infrastructure disbursements down by about 50 percent year-on-year.

The energy shock has weighed on economic momentum as the Philippines faced sharp fuel price increases, although these have started to ease as global energy pressures moderate. Still, fuel prices remain higher than year-ago levels, Rana said.

Remittances are also likely to be soft in the second quarter due to geopolitical volatility in the Middle East. At the same time, domestic demand, which has been the main driver of Philippine growth, has weakened.

“All the factors are contributors, but the weak consumer demand and weak public investment are more influential in our revision,” Rana added.

The Philippines is expected to underperform the broader Asia-Pacific region, where growth is projected at 4.4 percent this year and in 2027.

S&P expects Philippine growth to recover to 5.8 percent in 2027, although this was still lower than its earlier projection of 6.2 percent. Growth is then seen picking up to 6.2 percent in 2028 before easing slightly to 6.1 percent in 2029.

The debt watcher’s baseline assumes that disruptions in the Strait of Hormuz will gradually ease in the second half of the year. It expects global oil prices to remain elevated in the coming months before gradually returning to pre-crisis levels in early 2028.

However, S&P warned that the Middle East situation remains highly uncertain. In a downside scenario where shipping flows through the Strait of Hormuz remain restricted for most of 2026, average oil prices could be 20 percent higher than in its baseline forecast.

For the Philippines, S&P expects inflation to accelerate to 4.8 percent this year from 1.7 percent in 2025. Inflation is projected to ease to 3.3 percent in 2027, three percent in 2028 and 2.9 percent in 2029.

The 2026 forecast exceeds the Bangko Sentral ng Pilipinas (BSP)’s two to four percent target range, reflecting the expected impact of higher energy prices, food supply risks and second-round effects.

“We expect easing energy prices to lower headline inflationary pressures, but with El Niño conditions during the year we expect food price pressures to increase. We are seeing some passthrough to core prices as core inflation increased in May,” Rana said.

The debt watcher expects the BSP’s policy rate to end 2026 at five percent, higher than the current 4.75 percent. It sees the rate easing to 4.50 percent in 2027 and four percent in 2028 and 2029.

“BSP will balance between slowing domestic demand on the one hand, against rising inflation and a weaker currency on the other,” Rana said.

“The central bank prioritizes medium run price stability, and in our view will maintain tight monetary policy settings to keep inflation expectations anchored,” he said.