05.06.2026
Philippines’ economy slowed in 2025 and weakened further in early 2026, as higher oil prices, budget delays, softer investment and global uncertainty weighed on domestic demand. Growth is expected to recover in 2027 as inflation eases, infrastructure spending normalises and private consumption strengthens. Inflation rose sharply in 2026 after very low price pressures in 2025, reflecting the Philippines’ exposure to imported fuel and transport costs. Fiscal consolidation is expected to continue gradually, but public debt remains above pre-pandemic levels. The external position remains manageable, supported by remittances, services exports and electronics exports, although the current account is expected to stay in deficit.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 4.4 | 3.7 | 5.6 |
| Inflation (%, yoy) | 1.7 | 5.4 | 2.2 |
| Employment rate (% of working-age population, 15+) | 59.7 | 59.7 | 59.7 |
| Fiscal balance (% of GDP) | -5.6 | -4.8 | -4.7 |
| National government debt (% of GDP) | 63.2 | 62.5 | 62.2 |
| Current account balance (% of GDP) | -3.3 | -3.8 | -2.9 |
Growth slows before recovering in 2027
Philippines’ real GDP growth slowed to 4.4% in 2025, below the economy’s medium-term potential. Growth was supported by services and electronics exports, but investment weakened sharply and private consumption remained softer than expected. In early 2026, growth slowed further as oil-price shocks, delayed budget execution, weaker investor confidence and global uncertainty weighed on activity.
Growth is projected to slow to 3.7% in 2026 before recovering to 5.6% in 2027. The rebound should be supported by stronger private consumption, infrastructure spending, investment recovery and services exports. However, the outlook remains exposed to global trade uncertainty, high energy prices, weather shocks and weaker demand from major trading partners.
Inflation rises sharply in 2026
Inflation averaged only 1.7% in 2025, helped by lower food and energy prices. However, inflation rose sharply in early 2026 as global oil prices increased and transport costs surged. This pushed inflation above the central bank’s target range and forced monetary policy to remain cautious.
Inflation is projected to average 5.4% in 2026 before easing to 2.2% in 2027. The disinflation path depends heavily on fuel prices, food supply, exchange-rate movements and global shipping costs. Targeted support for vulnerable households would be more fiscally efficient than broad fuel-tax relief.
Fiscal consolidation continues gradually
The fiscal deficit remained large in 2025, at 5.6% of GDP, reflecting weaker revenue collection, elevated spending needs and interest costs. The deficit is projected to narrow to 4.8% of GDP in 2026 and 4.7% in 2027 as revenue measures and expenditure control take effect.
National government debt is projected to decline only gradually, from 63.2% of GDP in 2025 to 62.2% in 2027. Debt remains manageable, but fiscal space is limited. Sustained consolidation will require stronger tax administration, better spending efficiency and protection of priority investment in infrastructure, health, education and climate resilience.
External position remains manageable but vulnerable
The current account deficit narrowed to 3.3% of GDP in 2025, supported by electronics exports, resilient remittances and lower import costs. However, it is projected to widen to 3.8% of GDP in 2026 as higher energy prices raise the import bill, before narrowing to 2.9% in 2027.
The external position remains supported by remittances, business-process outsourcing, tourism recovery and electronics exports. However, the Philippines remains vulnerable to oil-price shocks, exchange-rate depreciation, weaker global electronics demand, trade fragmentation and tighter global financial conditions.
Overall outlook
Philippines’ outlook remains positive, but the near-term recovery has weakened. Growth is expected to slow in 2026 before rebounding in 2027, while inflation should fall back toward the target range after the fuel-driven spike. Fiscal consolidation and debt reduction will be gradual, and external deficits are likely to persist. Sustained progress will depend on improving infrastructure delivery, strengthening fiscal mobilisation, supporting private investment, raising agricultural productivity and protecting vulnerable households from food and energy shocks.
Sources:
World Bank, Philippines Macro Poverty Outlook, April 2026.
World Bank, East Asia and Pacific Economic Update, April 2026.
International Monetary Fund, Philippines: 2025 Article IV Consultation and Staff Report, December 2025.
International Monetary Fund, World Economic Outlook, April 2026.
Bangko Sentral ng Pilipinas, Monetary Policy and Inflation Developments, 2026.
National Economic and Development Authority, Philippine Economic Performance and Outlook, 2026.
