Philippines' Economic Growth Losing Momentum Amid AI Boom Lag

MANILA, Philippines — Moody’s Analytics said Philippine economic growth was losing momentum as the country misses out on the gains from the global boom in artificial intelligence (AI) that have helped some of its Southeast Asian neighbors weather global headwinds. In a webinar on Aug. 31, economists at Moody’s Analytics said Indonesia, Malaysia, Singapore and Thailand had avoided a sharper slowdown despite an oil shock stemming from the Middle East crisis. READ: Amro cuts 2026 PH growth forecast Growth in those economies has held up better than expected at the start of the year, they said. The countries share a common advantage: They are plugged into the global AI boom. Singapore and Malaysia have benefited from strong demand for semiconductors and data centers, while Thailand is beginning to see similar gains, according to Moody’s Analytics. The Philippines, by contrast, has been weighed down by weak domestic demand, sluggish investment and political uncertainty, leaving its economy to lose momentum. “The Philippines is telling quite a different story,” said Sarah Tan, an economist at Moody’s Analytics. “It is no doubt part of the tech supply chain, but its role is more concentrated in the backend assembly and testing.” The Philippines is seeing some investment in AI and data centers, Tan said, “but it hasn’t really received the kind of boost that regional peers are getting.” “Naturally, economies that are more plugged into this AI boom have captured more of the upside,” she added. Moody’s Analytics recently trimmed its 2026 growth forecast for the Philippines to 3 percent from the prior estimate of 4 percent, warning that domestic economic activity may remain subdued for the rest of the year as stubbornly high inflation weighs on consumer spending. The firm’s revised estimate falls short of the Marcos administration’s downwardly revised growth target of 3.5 percent to 4.5 percent. The slowdown was already evident in the first half, when the economy expanded just 2.6 percent. Growth was weighed down by the fallout from the Middle East conflict, which hit an economy still recovering from a confidence shock linked to a major corruption scandal. READ: IMF, ADB slash PH growth forecast To combat inflation, the Bangko Sentral ng Pilipinas (BSP) has delivered three quarter-point rate hikes since April, bringing the policy rate to 5 percent. BSP Gov. Eli Remolona Jr. said the August rate hike was a “preemptive” response to emerging risks from a severe El Niño episode and possible wage hikes. On the growth side, Remolona said the economy’s fundamentals “appear to be intact over the medium term,” adding that a recovery in government spending could help stimulate activity in the second half of the year. On foreign exchange, the peso has also failed to benefit from the AI-driven gains seen elsewhere in the region, Jeemin Bang, an associate economist at Moody’s Analytics, said. “Weak investor confidence and a net energy importer status have weighed significantly on the currency since the start of the year,” Bang said, adding that the country remains at the “lower end” of the electronics value chain. INQ