The Development Budget Coordination Committee (DBCC) revised the Philippines' economic growth forecast downward days after the country achieved upper-middle-income status, now expecting the economy to grow by only 3.5% to 4.5% in 2026 before recovering to 5% to 6% from 2027 to 2030. Economic managers cited heightened domestic and external uncertainties, including governance-related issues, geopolitical tensions in the Middle East, and other global developments affecting business and consumer confidence. The downgrade marks a retreat from President Ferdinand Marcos Jr.'s original targets announced in his 2022 State of the Nation Address, where he projected 6.5% to 8% annual real GDP growth from 2023 to 2028.
DBCC Cuts Growth Targets from Previous Forecasts
The DBCC's latest review of medium-term assumptions lowered the 2026 growth projection from the 5% to 6% forecast issued in December 2025. The committee also revised down expectations for 2027, previously set at 5.5% to 6.5%, and for 2028, previously targeted at 6% to 7%. The new forecast projects growth of 5% to 6% from 2027 to 2030.
Government Cites Governance Issues and Geopolitical Tensions
The DBCC stated that growth is expected to moderate this year due to heightened domestic and external uncertainties. The committee identified governance-related issues, geopolitical tensions in the Middle East, and other global developments affecting business and consumer confidence as factors behind the revised outlook. The DBCC did not elaborate on what the governance-related issues were, though the article notes that in 2026, the Philippines has been dealing with alleged corruption and irregularities in flood-control projects, as well as impeachment proceedings against Vice President Sara Duterte.
The committee warned that elevated inflation could temper household consumption and investments, while slower growth in remittances and visitor arrivals could further dampen the economy. The DBCC also flagged the looming El Niño in the second half, which could reduce agricultural output and disrupt economic activity.
Inflation Forecast Set at 6% to 7% for 2026
The DBCC expects inflation to average 6% to 7% in 2026, before easing to 4% to 5% in 2027 and returning to the government's 2% to 4% target range from 2028 to 2030. Inflation in the first half of 2026 averaged 4.8%, and eased to 6.4% in June.
The DBCC assumes Dubai crude will average $80 to $100 per barrel in 2026, before easing in later years. The article notes that lower crude prices do not automatically translate to immediate pump price cuts, since local fuel prices also depend on refined product benchmarks, import timing, inventories, and the peso-dollar exchange rate.
Recent labor data show strain in the farm sector, with unemployment rising to 4.8% in May 2026 and agriculture and forestry shedding 905,000 jobs year-on-year.
Proposed 2027 Budget Reaches P7.2 Trillion
The proposed 2027 national budget is P7.2 trillion, equivalent to 21.7% of GDP, while 2026 disbursements are expected to reach P6.47 trillion. In 2027, the government expects to collect P5.21 trillion in revenues while spending P6.90 trillion, leaving a projected deficit of P1.69 trillion, or 5.1% of GDP.
Economic managers aim to gradually narrow the deficit from 5.4% of GDP in 2026 to 3.5% by 2030. The government plans to pursue the full implementation of tax policy reforms including the VAT on Digital Services Act, CREATE More law, Capital Markets Efficiency Promotion Act, and the new Mining Fiscal Regime, alongside better tax administration, digitalization, and enforcement.
On the spending side, the government stated it will look for savings by cutting unnecessary recurring expenses, tightening day-to-day operating costs, reviewing the performance incentive system for government workers, and speeding up its Government Optimization Program. The DBCC also stated it will rationalize cash subsidy and financial assistance programs to reduce overlaps and better target beneficiaries.
FAQ
What is the Philippines' new economic growth forecast for 2026?
The Development Budget Coordination Committee (DBCC) revised the Philippines' 2026 growth forecast to 3.5% to 4.5%, down from the 5% to 6% projection issued in December 2025. The committee expects growth to recover to 5% to 6% from 2027 to 2030.
Why did the Philippine government lower its growth outlook?
The DBCC cited heightened domestic and external uncertainties, including governance-related issues, geopolitical tensions in the Middle East, and other global developments affecting business and consumer confidence. The committee also warned that elevated inflation could temper household consumption and investments, while slower growth in remittances and visitor arrivals could further dampen the economy.
What is the Philippine government's inflation forecast for 2026?
The DBCC expects inflation to average 6% to 7% in 2026, before easing to 4% to 5% in 2027 and returning to the government's 2% to 4% target range from 2028 to 2030. Inflation in the first half of 2026 averaged 4.8% and eased to 6.4% in June.
