Oil shock, policy uncertainty prompt WB to cut PH outlook

MANILA, Philippines The World Bank (WB) on Monday sharply lowered its outlook for the Philippine economy, warning that rising uncertainty and a global oil shock have slowed one of Southeast Asia’s fastest-growing economies by eroding household spending, business investment and job creation.

In its latest Philippine Economic Update, the Washington-based lender now expects the country’s economy to expand 3.7 percent in 2026, a steep downgrade from the 5.3 percent growth it projected in December. It also cut its 2027 forecast to 5.2 percent from 5.4 percent.

READ: IMF, ADB slash PH growth forecast

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The bank attributed the slowdown to two overlapping shocks.

Business activity and expansion have weakened as firms grapple with heightened global and domestic policy uncertainty, while a corruption crackdown that triggered a review of major infrastructure projects has temporarily delayed public spending.

At the same time, the conflict in the Middle East triggered a surge in global oil prices that quickly filtered through to domestic inflation, squeezing consumers and further dampening economic activity.

Despite the weaker near-term outlook, the World Bank said the Philippines’ newly attained upper middle-income status presents an opportunity to accelerate growth through cheaper and cleaner electricity.

It estimated that residential power rates could fall by as much as 28 percent in the near term if reforms are implemented. Meeting the government’s target of raising renewable energy’s share of the power mix to 35 percent by 2030 could also create about 161,000 jobs and lift roughly 730,000 Filipinos out of poverty.

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READ: S&P cuts PH growth outlook to 4.1%

“Looking ahead, bringing down the Philippines’ electricity costs—among the highest in Asean—is a powerful lever to boost firm competitiveness and household living standards,” the bank said.

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“Rising demand from households, firms, transport, and data centers creates both a challenge and an opportunity,” it added. “If the power system expands efficiently and sustainably, electricity can become a driver of competitiveness and resilience rather than a constraint.” INQ