GLOBAL uncertainties and the ‘broad impacts’ of corruption could further weaken the country’s economic growth this year and next year, according to the Asian Development Bank (ADB).
In its Asian Development Outlook (ADO) for September, ADB said it now expects the country’s GDP growth to slow to 5.7 percent in 2026 from the 5.8 percent estimate for 2026 it made in July 2025. The forecast for this year pegged at 5.6 percent was the same estimate in July but was slower than the 6 percent estimate it released in April.
ADB Country Director for the Philippines Andrew Jeffries said the global uncertainties stemmed from the impact of higher US tariffs on the economy. However, while ADB did not yet account for its impact, the controversy surrounding flood control projects could further undermine economic growth.
‘We didn’t see a reason to reduce GDP projections due to that issue [flood control], but it’s certainly a heightened risk; between now and our December update there may be more quantifiable data available that may alter our projections,’ Jeffries said during a media briefing.
Higher United States tariffs imposed on various commodities worldwide have created global policy uncertainty which has slowed down growth, particularly in advanced economies.
The impact of higher tariffs, which the Philippines has not escaped, and the impact on advanced economies could also dim the economic prospects of the country.
The United States slapped a tariff of 19 percent on all Philippine goods entering the American market beginning in August 2025. This new rate was a result of negotiations between Washington and Manila which occurred in July.
Nonetheless, ADB said, the impact of these uncertainties may be cushioned by the country’s strong domestic demand given the slowdown in inflation. The increase in commodity prices remained below the 2 to 4 percent target set by the Bangko Sentral ng Pilipinas (BSP).
ADB projected that inflation could average 1.8 percent this year and pick up to 3 percent next year. Both forecasts are within the inflation target of 2 to 4 percent set by the BSP.
The benign inflation environment allowed the BSP to continue reducing key policy rates. In the last Monetary Board meeting, the central bank reduced the Target Reverse Repurchase rate by 25 basis points to 5 percent in what BSP Governor Eli Remolona Jr. said was the ‘Goldilocks’ rate. Officials said more rate cuts could be implemented by the end of the year.
With the slowdown in inflation, ADB Senior Economics Officer Teresa Mendoza said household spending, one of the pillars of domestic demand, has shown resilience this year.
Mendoza noted that while there was an observed increase in the purchase of basic items, Filipino households also increased their spending on non-essentials such as domestic travel and recreation.
Earlier, ANZ Research said Filipinos swiping their credit cards and obtaining loans against their salaries are helping boost consumption spending in the country but these are deemed ‘unhealthy’ practices.
In its quarterly brief, ANZ Research noted that domestic demand has been weak in the region, except for the Philippines, which is seeing an uptick in private consumption as well as inflow of new consumption.
ANZ Research said private consumption in the country, however, was driven by credit card spending and loans against salaries. These borrowings were not being spent on asset creationMeanwhile, ADB said developing Asia’s growth forecasts were also reduced to 4.8 percent and 4.5 percent in 2025 and 2026 respectively.
The ADB cited risks that could bring growth down such as tariff and trade uncertainty, financial market volatility, geopolitical tensions in the Middle East and Ukraine, and property market fragility in the People’s Republic of China which could affect other countries.