Barren slopes and dead trees normally submerged below the tree line, which marks the reservoir's normal capacity, become visible as water levels dropped to 151.45 masl in this photo taken on July 23, 2026. Gigie Cruz, ABS-CBN News
MANILA — Even as Metro Manila wades through another round of torrential rain, flooded streets, and food costs that refuse to come down, it has to brace itself for the bigger climate phenomenon that hasn't landed yet. Bloomberg Economics is warning against a "Super El Niño" by the end of 2026 — potentially one of the strongest since 1950.
Bloomberg Economics' senior ASEAN economist Tamara Henderson said at the PSE Star Investor Day briefing Monday that elevated prices will not ease until next year and that growth is expected to stay weak through the same stretch. The Philippines is more vulnerable than many of its neighbors, she said.
Philippine real GDP growth is seen at 3.4 percent in 2026 — second-lowest among the six ASEAN economies Bloomberg Economics tracks, ahead of only Thailand. Headline inflation forecast is at 5.8 percent, the highest in the bloc.
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ASEAN is one of the most exposed regions globally, partly because food carries an outsized weight in its inflation baskets. Indonesia and the Philippines top that list: Bloomberg Economics estimates El Niño could add 1.9 percentage points to headline inflation in the Philippines — and that's for food alone. Henderson expects the real toll to be at two full points, keeping inflation elevated well into next year.
Across the rest of ASEAN, AI-related demand is lifting exports, pulling in investment, cushioning economies that would otherwise be feeling oil and tariff pressure due to the war in Iran and the US' trade policy. The Philippines isn't capturing much of this. Henderson pointed to the drag from the government scandal that's dented investor confidence domestically, on top of inflation eating into household spending power.
Henderson pointed out that fiscal space is what shortens a recovery and limits economic scarring. Several ASEAN economies still haven't fully restored the fiscal discipline they had pre-pandemic. The Philippines is one of them.
Countries with a stronger business climate — political stability, rule of law, predictable regulation and tax incentives — have fared better in attracting foreign direct investment, Henderson said.
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She cited Singapore, which has recorded a steady rise in foreign investment through the pandemic and now through the current oil shock. Improving a country's business climate does not require significant government spending, she said, but it does require political will.
Competition for that investment has intensified, she added, as the Trump administration's trade policy draws capital back to the US instead of letting it flow overseas.
Henderson also addressed the oil market, which she said has been rattled by a shock worse than three of history's largest oil shocks combined, according to the International Energy Agency. Tanker traffic through the Strait of Hormuz has remained volatile through the year, with no resolution yet between the US and Iran.
On US tariffs, Henderson said only about a quarter of the cost has so far been passed on to American consumers, limiting the hit to demand. She flagged a bigger risk still to come: Washington has threatened tariffs on semiconductors as high as 300%, though those duties have not taken effect. Chips make up a significant share of ASEAN exports, she said, and duties at that level would ripple across a wide range of other goods and services that rely on them.
Henderson said the global outlook for 2026 and 2027 points to higher inflation, weaker growth, fiscal strain and difficult monetary policy decisions. She does not expect the disruptions to cause significant damage to global growth overall, citing continued AI-related investment as an offsetting factor. For the Philippines, she said, that offset is largely absent.
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