Manila: The Philippine economy is projected to post the second-highest growth in the Association of Southeast Asian Nations (ASEAN) this year, although the Middle East conflict could push inflation higher, the ASEAN+3 Macroeconomic Research Office (AMRO) said.

According to Philippines News Agency, in its latest ASEAN+3 Regional Economic Outlook October Update released Monday, AMRO forecasts Philippine growth at 5.3 percent in 2026, second only to Vietnam's projected 7.4 percent. The Philippines is expected to outpace other regional peers, including Indonesia (5 percent), Cambodia (4.9 percent), Malaysia and Lao PDR (4.6 percent), Singapore (3.4 percent), Myanmar (2.5 percent), and Thailand (1.7 percent). Growth is projected to further accelerate to 5.8 percent in 2027.

In a virtual briefing, AMRO Group Head and Principal Economist Allen Ng emphasized that stronger growth could have been achieved if not for the Middle East situation. "I think there was strong momentum in growth in the Philippines prior to the escalation of the conflict, and it's driven a lot by domestic demand activities," Ng said. He noted that without the Iran conflict, Philippine growth could have been higher.

Ng further warned that the country's heavy reliance on oil and gas imports from the Middle East could drive inflation upward. AMRO now expects inflation to average 3.9 percent this year, higher than its earlier 3.2 percent forecast, before easing to 3.6 percent in 2027. "Risks are clearly tilted to the downside if oil prices rise further and disruption becomes more prolonged," Ng added.

To mitigate the impact of rising oil prices, the government has rolled out measures including fuel subsidies for public utility vehicle drivers. AMRO chief economist Dong He expressed confidence in the country's ability to absorb external shocks, noting that the Philippine economy was performing well last year and entered this period in a healthy condition.

He also suggested that, over the longer term, the Philippines should diversify its energy sources and strengthen climate resilience to better withstand future disruptions.