Manila: Philippine economic growth is expected to slightly go up this year, mainly driven by domestic demand, but higher fuel prices may affect growth prospects, Moody's Analytics said on Monday.

According to Philippines News Agency, in a report, Moody's Analytics projects the Philippine economy to grow by 4.9 percent this year. This projection indicates an upward adjustment from the anticipated 4.4 percent gross domestic product growth in 2025. However, it remains lower than the previously projected 5.1 percent economic growth for 2026. The growth forecast for 2027 was also adjusted to 5.2 percent from an earlier 5.4 percent.

Moody's Analytics Assistant Director-economist Sarah Tan stated in a separate email that this revision reflects a reassessment of domestic momentum following weaker-than-expected expansion in 2025, rather than any significant change in geopolitical assumptions. Tan highlighted that the latest projections are based on the assumption that the Middle East conflict remains contained and concludes soon, limiting its direct impact on Philippine growth.

Despite these challenges, growth is expected to pick up in 2026, with the outlook still largely dependent on domestic demand. Tan noted that private consumption should remain supported by stable labor market conditions and steady remittance inflows, with growth likely to remain moderate rather than show a sharp acceleration.

Nevertheless, Tan cautioned that risks to the growth outlook remain firmly to the downside. These risks include higher fuel prices and increased import costs that could feed into inflation, widen the trade deficit, and pressure the currency. Such factors might compel the Bangko Sentral ng Pilipinas to pause its easing cycle or even tighten policy if second-round effects emerge.

Persistent high prices could erode household purchasing power and dampen consumption. Furthermore, higher electricity costs, already among the highest in the region, could further weigh on business activity and overall growth, Tan added.