The OECD downgraded its Philippine growth forecast for 2026 to 3.2%, significantly lower than its previous estimate of 5.1%, citing elevated oil prices and stagflationary risks. Inflation is projected to rise above the government target, while growth is expected to recover in 2027.
Vendors assist customers with shopping for school supplies along Roman Street in Divisoria, Binondo, Manila, May 30, 2026. — PHILIPPINE STAR/NOEL B. PABALATEgraded its Philippine growthshock amid elevated oil prices In its latest Economic Outlook released on June 3, the OECD said it expects the Philippine economy to expand by 3.2% in 2026, significantly slower than its 5.1% forecast in December.
If realized, this will be slower than the 4.4% gross domestic product growth in 2025.
“We project growth to be weak at 3.2% in 2026, before recovering to 5% in 2027 as inflation dissipates and public investment gradually recovers,” said OECD economist Cyrille Schwellnus in an online media briefing on Wednesday. Both forecasts are below the government’s 5%-6% growth target for 2026 and 5.5%-6.5% target for 2027. The Palace earlier said the Development Budget Coordination Committee revised its macroeconomic assumptions, but new figures have yet to be released.
Meanwhile, inflation is projected to exceed the government’s 2%-4% target range in 2026 before easing to the upper end of the band in 2027. The OECD raised its Philippine inflation forecast to 6.8% in 2026 from 2.6%, as well as its 2027 projection to 4% from 3% previously.
The inflation forecast for 2026 is above the Bangko Sentral ng Pilipinas’ revised estimate of 6.3%, while its 2027 forecast of 4% is below the BSP’s 4.3% estimate.is“In 2026 we see growth slowing quite sharply and inflation increasing quite a bit and that would go in the direction of a stagflationary shock,” he said.
“But we also highlight in our note that we currently expect this to be temporary. So, growth will recover in 2027 to 5% and inflation is projected to return to the central bank’s target band in 2027,” he added.
However, Mr. Schwellnus said the Philippines’ recovery would depend on a rebound in public investment, easing inflationary pressures, developments in the Middle East, and a vigilant, data-dependent monetary policy.
“The Philippines entered the energy crisis with growth already slow,” he said, citing the sharp contraction in public investment following corruption investigations in 2025, as well as softer private consumption amid a weakening labor market. The OECD expects private consumption to grow by 2.7% in 2026 and 3.8% in 2027. These are sharply below its December projections of 5.1% and 5.9%, respectively.
It expects gross fixed capital formation, the investment component of the economy, to grow by 1.2% in 2026 and 8.2% in 2027 from earlier projections of 2.4% and 5.3%, respectively.
“Going forward, we think that high inflation will further weigh on real incomes and private consumption while the recovery in public investment is expected to remain subdued in the near term in 2026,” Mr. Schwellnus said. “The central bank has already raised the policy rate by 25 basis points , and we expect further tightening as inflation and exchange rate pressures rise,” Mr. Schwellnus said.
“But despite this monetary tightening, inflation is projected to average 6.8% in 2026, well above the central bank’s target band, before gradually easing as energy pressures dissipate,” he added. The OECD expects the BSP to raise its policy rate by another 100 bps in 2026 before easing to 5% in 2027.
Please follow us on Google to support us OECD Philippine Economy Growth Forecast Inflation Oil Prices
Philippines Latest News, Philippines Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
DepEd Overhauls Academic Calendar and Grading System for SY 2026-2027The Philippine Department of Education implements a three-term calendar and adjusted grading system starting June 2025, aiming to address the learning crisis by maximizing teaching days and simplifying lesson planning.
Read more »
President Marcos Jr. Advises DepEd for School Year 2026-2027 PreparationPresident Marcos Jr. emphasized the need for DepEd to improve facilities and ensure readiness for the opening of basic education classes on June 8, considering the start of the Habagat season. He also joined literacy activities, including a storytelling session with some Grade 1 learners of the Philippine fable, "Ang Matsing at ang Pagong" (The Money and the Turtle), written by national hero Jose Rizal.
Read more »
Pride Month 2026: 11 Fun events to go toA list of Pride-themed events you can go to, to celebrate the LGBT+ community, show your alleyship, and to continue to fight for their rights. Remember, pride is protest.
Read more »
AMRO cuts Philippine growth forecasts for 2026, 2027 - BusinessWorld OnlineTHE ASEAN+3 Macroeconomic Research Office (AMRO) lowered its Philippine growth forecast for this year and in 2027, as stronger inflationary pressures are expected to weigh on domestic demand. In its Interim Update of the ASEAN+3 Regional Economic Outlook released on Tuesday, AMRO slashed its 2026 growth forecast for the Philippines to 4.1% from 5.
Read more »