World Bank says Philippines an 'outlier' hit harder by energy costs, gaining less from AI boom
The World Bank kept its 2026 GDP growth forecast for the Philippines unchanged at 3.7%, calling the country an 'outlier' in East Asia due to its exposure to high energy prices and limited gains from the global AI boom. Unlike regional peers, the Philippines has not benefited from AI-related investme
The World Bank has labelled the Philippines an “outlier” in East Asia, saying it is being hit harder by high energy costs and benefiting less from the global artificial intelligence (AI) boom than its regional peers. In its October East Asia and Pacific Economic Update, the multilateral lender kept its 2026 gross domestic product (GDP) growth projection for the Philippines unchanged at 3.7%, which would be slower than the 4.4% expansion recorded in 2025 and near the lower end of the government's 3.5%-4.5% target.
“The Philippines is the outlier in East Asia. It is struggling more than others with high energy prices,” World Bank Chief Economist for Asia Franziska Lieselotte Ohnsorge said at a briefing on Tuesday. The Philippines imports at least 90 per cent of its oil supply from the Middle East, making it extremely vulnerable to swings in global oil prices. The country is currently under a state of national energy emergency until March 2027 amid concerns over supply.
Unlike many other countries, the Philippines did not respond with energy subsidies, the World Bank noted. This, combined with currency depreciation and limited local buffer stocks, passed the shock through to consumers. At 3.7%, the World Bank's 2026 GDP forecast for the Philippines was the fourth lowest among Southeast Asian economies, ahead only of Cambodia (3.5%), Myanmar (2%), and Thailand (2%).
While it kept the Philippines forecast unchanged, the World Bank raised the 2026 forecasts for Vietnam (by 1.1 percentage points to 7.4%), Indonesia (by 0.5 ppt to 5.2%), Malaysia (by 0.7 ppt to 5.1%), Thailand (by 0.7 ppt to 2%), and Laos (by 0.6 ppt to 4.1%) due to stronger AI-related investment and exports. Ms Ohnsorge said the Philippines is gaining less from the current global AI boom as it is less integrated into global AI-related value chains than Vietnam and Malaysia. “So, it's not benefiting from these global tailwinds, but it's really being hurt by the global headwinds, and that has sort of set back growth more,” she added.
The World Bank raised the growth outlook for East Asia and the Pacific by 0.3 ppt to 4.5% this year but kept the 4.4% forecast unchanged for next year. However, it expects the Philippine economy to recover starting next year, with GDP projected to expand by 5.2% in 2027, and by 5.5% in 2028, contingent on the rebound of public investment and the expected normalisation of inflation by 2027. Inflation in the Philippines is forecast to average 5.8% in 2026 and 3.9% in 2027.
The World Bank also pointed to weaker investment and pressure on the Philippines' external position. Public construction contracted by 32% in the second quarter, while net foreign direct investment inflows fell to their lowest level since 2016. The current account deficit widened to 4.8% of GDP in the first quarter due to higher import prices. The bank noted that energy costs make up 65% of data centre operational expenditures, and residential electricity tariffs are higher in the Philippines and Thailand than in Malaysia, Vietnam and China, which could affect the country's ability to attract AI-related investment.
