World Bank sees below-target growth for Philippines in 2028

THE WORLD BANK said the Philippine economy is likely to expand by 5.6% in 2028, still below the government’s 6-7% target, amid an expected recovery in public investment.

In the latest Global Economic Prospects report, the World Bank said it retained its gross domestic product (GDP) growth forecasts for the Philippines at 3.7% in 2026 and 5.6% in 2027.

If realized, growth would fall short of the government’s 5-6% target for 2026 but would be at the lower end of its 5.5-6.5% goal for 2027.

“Growth in East Asia and the Pacific excluding China is forecast to improve to 4.9% in 2027-28 as geopolitical uncertainty dissipates, energy prices settle, and demand improves,” the World Bank said.

“Public investment is expected to recuperate in the Philippines, and Indonesia’s growth will be supported by state-led investment initiatives,” it added.

The Philippine economy expanded by a weaker-than-expected 2.8% in the first quarter, the slowest pace since the pandemic, amid lingering uncertainty from last year’s corruption scandal and higher oil prices linked to the Middle East conflict.

“The World Bank’s outlook is plausible, but I would not treat it as the only reasonable scenario,” Ateneo Center for Economic Research and Development Senior Research Fellow Ser Percival K. Peña-Reyes told BusinessWorld.

He said the weak 2026 forecast reflects uncertain global conditions, elevated geopolitical and trade tensions, fiscal consolidation, weather-related disruptions, and food price shocks.

However, Mr. Peña-Reyes said economic expansion this year could be stronger if household consumption remains resilient, inflation continues to ease, infrastructure spending is sustained, investment reforms gain traction, and monetary policy becomes more accommodative.

“The key question is whether the Philippines can lift its potential growth rate rather than simply recover cyclically,” he said.

“Sustained growth above 6% typically requires faster investment, stronger export competitiveness, improved logistics, and continued reforms in energy, transportation, and the business environment,” he added.

To be able to achieve the upper end of the government’s targets over the next two years, Mr. Peña-Reyes said this would require low inflation, stronger infrastructure spending, higher investment, reliable and affordable energy, faster productivity growth, greater export competitiveness, and continued reforms.

“If these conditions are met and the external environment remains reasonably stable, growth could move closer to the government’s targets after 2026,” he said.

“However, if oil prices remain elevated for an extended period because of Middle East tensions, growth would likely stay closer to the more cautious forecasts of institutions such as the World Bank,” he added.

Meanwhile, University of Asia and the Pacific economist Marco Antonio C. Agonia said his own economic growth projections are broadly in line with the World Bank’s estimates.

“The World Bank’s gross domestic product growth estimates for the Philippines reflects immediate headwinds concerning Philippine growth prospects,” he told BusinessWorld.

“In the immediate term, growth should pick up as the National Government resumes infrastructure spending by the second half of the year and base effects from the second half of last year work to our advantage,” he added.

However, Mr. Agonia said the country can restore economic dynamism by rebuilding institutional confidence, developing high-value industries, and diversifying its sources of growth.

“More than the level of the forecasts, the important signal here is that the traditional driver of the Filipino growth engine, remittance-led consumption, is petering out, especially as spending momentum and economic confidence remain under siege,” he added.

His comments come as remittance growth has slowed in recent months, raising questions about the sustainability of one of the country’s key consumption drivers.

Cash remittances, or money coursed through banks by overseas Filipino workers, grew by 2.3% year on year to $2.874 billion in March. This was the weakest remittance growth since the 2.2% growth in June 2023. For the first quarter, cash remittances rose by 2.8% to$8.68 billion.

In its Poverty and Equity Assessment report, the World Bank said remittances, which account for 9-10% of GDP, play a critical role in household welfare and macroeconomic stability.

However, poorer regions are less likely to send workers abroad and therefore receive fewer remittances, limiting their ability to benefit from migration-driven income gains.

“The Philippines has a strong track record of policies supporting international migration for poverty reduction and local development,” the World Bank said.

“Targeting some of these efforts to lagging regions offers an opportunity for more rapid poverty reduction and reduced spatial inequities,” it added.

The World Bank estimated that narrowing regional disparities could boost national remittance inflows by 2% by 2030 and 7.4% by 2040, while helping accelerate poverty reduction in lagging areas.

GLOBAL OUTLOOK
Meanwhile, the World Bank on Thursday cut its global growth forecast for 2026 to 2.5% due to the war in the Middle East, and said growth could slow to just 1.3% if energy supply disruptions prove more severe and come with substantial stress in financial markets.

Global growth reached 2.9% in 2025, the bank said in its semi-annual Global Economic Prospects, up 0.2 percentage point (ppt) from its estimate in January. Its 2026 forecast is down 0.1 ppt from January, the lowest seen since the COVID pandemic that began in late 2019.

The bank lowered forecasts for two-thirds of countries as a result of the war, with the biggest cuts affecting the United Arab Emirates, Iraq and other countries in the Middle East whose energy exports have been hit hard by the conflict.

The World Bank’s stark outlook comes as the war launched by US and Israeli strikes on Iran on Feb. 28 drags into a fourth month. It has sent energy prices up sharply due to the closure of the Strait of Hormuz, renewed inflationary pressures worldwide, and fueled expectations of tighter monetary policy across many countries. Fertilizer prices are also up sharply, raising concerns about a major food supply crisis.

The World Bank said its baseline forecast assumed an average Brent crude oil price of $94 for the year, up 36% from 2025, and that the worst disruptions to energy supplies would abate by the end of July, with global headline inflation seen at 4%.

It said growth could slow to 2.1% if the energy disruptions lasted longer, and oil prices averaged $115 per barrel this year, which could drive inflation to 4.4%. The outlook would worsen further, with growth decelerating to just 1.3%, if the energy shock affected financial markets, resulting in lower energy prices, greater volatility and weaker confidence, it said.

“These risk scenarios show how quickly the outlook could weaken if energy and financial pressure reinforce each other,” Ayhan Kose, the World Bank’s deputy chief economist, said. If the energy shock triggered a financial market shock, confidence could erode quickly, he said. — Justine Irish D. Tabile with Reuters