The Philippine economy is set to experience a notable deceleration, with Bank of America (BofA) projecting a growth rate of only 2.5% in 2026. This forecast underscores a widening gap between the Philippines and other Southeast Asian economies benefiting from the ongoing artificial intelligence (AI) boom.
Philippine Growth Outlook Compared to Southeast Asia
The Philippines is expected to see a sharp slowdown relative to 2025.
Bank of America Global Research
- Philippine GDP growth forecast: 2.5%
- Southeast Asia's expected growth: 5%
In contrast to the Philippines, BofA forecasts stronger growth in the region, with Malaysia at 5.2%, Singapore at 5.1%, Vietnam at 8.2%, and Indonesia at 5.3% for 2026. This divergence is attributed to varying levels of exposure to the AI and electronics sectors.
BofA noted that while there may be modest gains in consumption and potential improvements in investment spending, these are expected to emerge from a low starting point. The bank classified the Philippine economy as more domestically oriented, less integrated into the global AI export cycle.
The report also highlights risks to the Philippine outlook, including high inflation rates and susceptibility to external shocks. BofA maintains its inflation forecast for the Philippines at 6.7% for 2026, predicting that rising oil prices and a recent minimum wage increase will contribute to inflationary pressures.
Significantly, the bank warns of a looming El Niño phenomenon, with a 69% probability of it being exceptionally strong from October to December 2026. The Philippines' reliance on food imports makes it particularly vulnerable to the associated inflation risks.
BofA also predicts that the Bangko Sentral ng Pilipinas (BSP) will keep the policy rate steady at 5% through 2026 and into 2027, given the anticipated slowdown in growth and peak inflation.