Philippine economic growth in 2026 would have hit the government’s downgraded target range had the war in the Middle East been short-lived, according to the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP).

However, the Bangkok-headquartered UNESCAP said a prolonged conflict could slow economic growth and drive higher inflation across Asia-Pacific as surging commodity and freight costs, supply chain disruptions, weaker global demand, and declining remittances and tourism weigh on jobs, consumer spending, and business investment in the region.

UNESCAP’s Economic and Social Survey of Asia and the Pacific 2026 report, released on Tuesday, April 21, projected Philippine real gross domestic product (GDP) growth at 5.2 percent this year before accelerating to 5.7 percent next year. These projections fall within the downscaled five- to six-percent and 5.5- to 6.5-percent growth targets for 2026 and 2027, respectively.

But UNESCAP clarified that “these projections are as of March 17, 2026, and have factored in the immediate macroeconomic impacts of the conflict in the Middle East.”

“These baseline projections assume that de-escalation over the course of 2026 will help stabilize commodity prices and restore market sentiment to some extent. Yet the situation remains highly uncertain, and the eventual economic impacts will depend on the scale and duration of the conflict,” UNESCAP said.

At the onset of the war, UNESCAP had forecast headline inflation in the Philippines to remain within target at 2.5 percent this year and next. However, inflation already breached the two- to four-percent target band deemed manageable and supportive to economic growth as early as March, hitting a 20-month high of 4.1 percent year-on-year, with authorities bracing for further price increases as the conflict persists.

UNESCAP also flagged risks to food inflation in the Philippines, Japan, Malaysia, and South Korea, noting that these economies rely heavily on imported food for domestic consumption.

Across the region, “under the alternative scenario of prolonged conflict, economic growth could be notably lower than currently projected while inflation would be higher,” UNESCAP warned.

“Under this scenario, a surge in commodity prices and freight costs as well as supply chain disruptions will spike inflation and interest rates; weaker global demand will dampen merchandise exports, remittances, and tourism; and subsequent job losses and plunging market sentiment will hurt consumer spending, business investment, and economic growth,” it added.

According to UNESCAP, “while early estimated economic growth impacts are modest, they could be more notable if the scale and duration of the conflict increase.”

It does not help that, for UNESCAP, “finding alternative energy sources could be a challenge and will come at a higher cost.”

“To manage inflation expectations, central banks in countries with relatively low inflation may postpone policy interest rate reductions while those where inflation is already high may have to raise the rates. Even when policy rates are unchanged, credit growth could slow as lending becomes more stringent. In some countries, however, a surge in investments in renewable energy (RE) in response to higher oil prices may help sustain credit growth,” according to UNESCAP.

In discussing the region’s energy transition, UNESCAP noted that “import-dependent economies such as Japan, the Philippines and Vietnam are more exposed to energy price volatility and geopolitical shocks, with political pressures shaped by energy security, affordability and market governance.”

While UNESCAP did not provide specific estimates for the war’s economic impact, it noted that weaker cash remittances would disproportionately hit lower-income households, especially in the Philippines, where about half of overseas Filipino workers (OFWs) are based in the Middle East and support domestic incomes.

“In India and the Philippines, about 40 percent of the transfers are used for essential spending, including medical expenses, of recipient households,” it pointed out.