Moody’s Analytics has further lowered its Philippine economic growth forecasts for this year and next to below-target levels, citing weak domestic confidence from 2025 as the main drag on output, while downplaying the impact of rising geopolitical tensions in the Middle East.

Sarah Tan, assistant director and economist at Moody’s Analytics, said the think tank has reduced its gross domestic product (GDP) growth forecast for the Philippines to 4.9 percent from 5.1 percent in its February projection for 2026.

Moody’s Analytics has also trimmed its 2027 projection to 5.2 percent from 5.4 percent, while keeping its 2028 forecast unchanged.

“The revision reflects a reassessment of domestic momentum after weaker-than-expected expansion in 2025, rather than any major change in our geopolitical assumptions,” Tan said, adding that Moody’s Analytics assumes the Middle East war “remains contained and ends soon.”

As such, Tan asserted that this would have a limited impact on the Philippine economy. Like the national government (NG), Tan also believes the economy will recover in 2026, largely due to robust private consumption.

Despite not emphasizing the oil supply-constricting geopolitical tensions, Moody’s Analytics still flagged the Philippines’ vulnerability to energy price shocks given its status as a net importer of oil and several goods.

Tan said the Philippines imports over half of its energy needs and lacks significant oil reserves, “leaving the economy highly exposed to higher oil and food prices.”

“Higher import costs would feed into inflation, widen the trade deficit, and put pressure on the currency, which could force the Bangko Sentral ng Pilipinas (BSP) to pause its easing cycle or even tighten policy if second-round effects emerge,” Tan further said.

She added that persistent high costs would erode Filipinos’ purchasing power and consequently weaken consumption, noting that the elevated cost of electricity would further pressure business activity and overall output expansion. She expects inflation to clock in at 2.5 percent this year and three percent in 2027, revised from 2.3 percent and 3.1 percent, respectively.

On a positive note, Tan believes private consumption is expected to remain supported by a stable job market and steady remittances, while investment may gradually improve as previous policy easing takes effect.

Still, confidence is likely to remain cautious amid ongoing corruption issues surrounding the controversial “ghost” flood control projects.