With the higher fuel prices, a limited oil storage capacity, a very vulnerable currency and other economic uncertainties happening around, the Philippines is headed towards higher inflation and slower gross domestic product (GDP) growth in the near future based on the latest analysis of Moody’s Ratings, according to a news report by BusinessWorld.
To put things in perspective, posted below is an excerpt from the BusinessWorld news report. Some parts in boldface…
MOODY’S RATINGS lowered its growth forecast for the Philippines and raised its inflation outlook, reflecting the impact of soaring global energy prices amid the Middle East conflict.
In a credit opinion on Tuesday, Moody’s cut its Philippine gross domestic product (GDP) growth projection to 4.9% this year from 5.5% previously. This is below the government’s 5-6% target for 2026.
For 2027, Moody’s trimmed its GDP growth forecast to 5.3% from 5.6% previously. If realized, this will be lower than the economic managers’ 5.5-6.5% target range for 2027.
“The conflict in the Middle East has increased downside risks to the Philippines’ economic outlook by raising global energy prices and external cost pressures,” it said.
Moody’s said it expects domestic demand and industrial activity to remain subdued due to high oil prices and fuel shortages.
“Higher energy and broader import costs are expected to erode real incomes amid high pass-through, dampen consumption, and weigh on industrial activity, reinforcing a firmer inflation trajectory,” it said.
Moody’s also noted that trade uncertainty and climate risks may also dampen economic activity.
“Our baseline assumes that the recovery in public investment will be gradual and begin only in the second half of 2026, as the government continues to take concrete measures to address the temporary slowdown. Meanwhile, higher energy import bills amid rising prices and peso depreciation, together with slower remittance growth, are expected to widen the current account deficit,” it said.
The Philippines is currently under a year-long national energy emergency as the Middle East crisis threatened its fuel supply. The government rolled out targeted subsidies and implemented energy conservation protocols.
“Together, these measures should mitigate the risk of significant supply disruptions,” Moody’s Ratings said.
Moody’s also hiked its average inflation forecasts to 3.7% in 2026 from 3% previously, and to 3.5% in 2027 from 3.2% previously, as oil prices remain elevated due to the Middle East conflict.
Moody’s forecasts are below the Bangko Sentral ng Pilipinas’ (BSP) 5.1% inflation projection this year and the 3.8% projection for 2027.
Inflation quickened to a nearly two-year high of 4.1% in March, breaching the BSP’s 2-4% target amid rising fuel and transportation costs.
“Inflation is expected to remain above the BSP’s target range, reducing policy flexibility and increasing the risk of policy tightening, even as softening growth and a negative output gap support a broadly accommodative stance in the near term,” Moody’s said.
Let me end this post by asking you readers: What is your reaction to this recent development? What do you think the government of the Philippines should do to stimulate economic growth and attract more foreign investors?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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