E-Paper
Sign In
Barring Covid-19, Philippines sees worst economic growth in 17 years amid Middle East war
The conflict and the resulting oil price shock triggered massive inflation that reached 7.2 per cent in April
- PUBLISHED: Sat 8 Aug 2026, 1:03 PM
[Editor's Note: For the latest updates on how the US-Iran war has escalated since a 14-point deal was signed on June 17, follow the Khaleej Times live blog.]
The Philippines is facing its slowest economic growth in nearly two decades, amid the Middle East war and suspension of vital government spending due to corruption and political scandals rocking the Ferdinand Marcos Jr. government.
Recommended For You
The country’s economic managers revealed that the country registered a measly 2.3 per cent growth in the second quarter of the year, following a bleak 2.8 per cent performance in the first three months of 2026.
Development secretary Arsenio Balisacan said that, excluding the Covid-19 pandemic years, the Philippines’ current economic trajectory is the weakest since 2009. He said the Middle East war and the resulting oil price shock triggered massive inflation that reached 7.2 per cent in April.
Stay up to date with the latest news. Follow KT on WhatsApp Channels.
Balisacan also pointed to slowed government spending on infrastructure projects due to ongoing corruption investigations. Government contractors, congressmen and senators, cabinet secretaries, and even Marcos Jr. himself are alleged to have benefitted from flood control project kickbacks worth hundreds of billions of pesos.
Marcos Jr. is also engaged in a political war with the Philippine Vice President, currently facing an impeachment trial for corruption herself, giving way to instabilities in government.
The government predicts an adjusted growth of 3.5 per cent to 4.5 per cent this year, a steep downgrade from the optimistic 5.3 per cent at the start of the year.
International finance downgrades PH outlook
The World Bank (WB) agrees with the bleak forecast, pegging Philippines overall economic performance to 3.7 per cent by year’s end. Business activity and expansion have weakened as foreign and local investors grapple with heightened global uncertainty due to the protracted war in West Asia, the international finance institution said.
"Growth is set to decelerate in 2026 on the back of weak investment, constrained consumption and sustainability," World Bank division for the Philippines, Malaysia, and Brunei director Zafer Mustafaoglu said.
The forecast on the Philippines is below the 4.1 per cent average growth expected for developing economies in East Asia and the Pacific, Mustafaoglu said, pointing out that the Philippine peso is suffering its lowest exchange rate in decades.
The surge in global oil prices quickly filtered through to domestic inflation, squeezing consumers and further dampening economic activity, reports added.
Migrant workers increase remittance
Overseas Filipinos have in fact increased their remittances to the Philippines despite uncertainties brought about by the US-Israel war against Iran.
The Philippines central bank reported that total cash remittances from January to May rose by 2.5 percent to $14.11 billion, up from $13.77 billion during the same period last year.
This happened despite 12,000 Filipino land-bound workers losing jobs or choosing repatriation from the Middle East because of the conflict.
About 6,200 Filipino seafarers are also impacted by the conflicts in and around the Strait of Hormuz, Arabian Gulf, and Red Sea while hundreds more are affected in the Russia-Ukraine conflict around the Black Sea.
However, the pace of increase in remittances from abroad has slowed to a four-year low, the country’s central bank said.
Overseas Filipino remittances contribute approximately 8.7 per cent of the Philippines' Gross Domestic Product, total cash and personal remittances reaching record-highs of $39.62 billion and supporting consumer spending.