PH economy grows slower at 2.3% in Q2 2026

The Philippine economy continued to slow down in the second quarter of 2026, still due to a subdued investor and consumer sentiment amid the lingering effects of the flood control corruption scandal and the inflationary pressure brought by Middle East crisis-induced global fuel price shocks, the Philippine Statistics Authority (PSA) reported on Friday.

At a press conference, PSA chief and National Statistician Claire Dennis Mapa said the economy, as measured by gross domestic product (GDP)—the value of goods and services produced in a period— grew 2.3% in the April to June 2026 period, slower than the 2.8% growth seen in the first quarter of 2026.

This is the economy’s weakest footing since the fourth quarter of 2009 —excluding the contraction seen during the COVID-19 pandemic years— when the GDP growth rate was at 1.8%.

The 2.8% second quarter GDP growth put the Philippines behind its neighbors in Southeast Asia that already released their April to June economic growth rates such as Indonesia at 5.29%, Vietnam at 8.39%, and Singapore at 5.7%.

The first half of 2026 GDP growth rate stood at 2.6%, still behind the government’s downwardly revised target of 3.5% to 4.5% for the entire year.

Despite the economic slowdown, Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio Balisacan said, “What we are experiencing right now, I believe, is transitory, temporary.”

“Domestic demand remained subdued, mainly because total investment continued to contract as public construction declined. Household consumption growth also moderated amid higher inflation, job losses, and lower remittance receipts arising from the Middle East conflict,” Balisacan said.

Household final consumption expenditure grew 2.8%, slower than 5.2% in the same period last year, weighed by contractions in transport (-7.5%), alcoholic beverages and tobacco (-1.9%), recreation and culture (-0.8%), and restaurants and hotels (-0.2%).

Government expenditure, likewise, slowed down by 8.3% from 8.7% year-on-year; while gross capital formation (GCF) —which measures investments— contracted by 9.2% from a growth rate of 0.9% a year ago.

The decline in GCF was due to the decline in construction at 14.8% with government spending on construction contracting 32.4%.

“Although public construction is a small part of the economy, the amount of contraction, at 32%, brought a significant impact on the economy,” Balisacan said.

“The sharp decline in public construction was the main contributor in the decline in investments… driven by continuous caution due to the flood control scandal,” the country’s chief economist said.

Among the major economic sectors, agriculture posted a growth rate of 2.7%, slower than 7% year-on-year; industry declined by 2.4%, from an increase of 2.1% weighed by the construction’s depreciation; services grew slower at 4.5% from 6.9%.

Agriculture, industry, and services sector contributed 7.5%, 27.9%, and 63.3%, respectively to the total GDP during the quarter.

“While the second-quarter result calls for decisive actions, recent indicators give us reason for cautious optimism that the economy may already be entering the early stages of recovery,” Balisacan said.

“The Department of Budget and Management began releasing mobilization funds for 2026 infrastructure projects to the Department of Public Works and Highways (DPWH) toward the end of June. The DPWH, in turn, started awarding contracts in June and July. We therefore expect public construction and infrastructure spending to begin picking up in the third quarter and gain further momentum in the months ahead,” the DEPDev chief said.

The Socioeconomic Planning chief added that private sector indicators are also “becoming more encouraging,” citing the Bangko Sentral ng Pilipinas’ business expectations survey showing more rosy outlook for the coming three months.

Balisacan said the economy needs to grow 4.4% in the second half of 2026, to achieve the government’s 2026 growth target of 3.5% to 4.5%.

The country’s chief economist said the government will accelerate the implementation of high-impact infrastructure projects by ordering implementing agencies to “carry out catch-up plans with clear milestones and accountability measures, including seeking the necessary exemptions for projects covered by restrictions related to the Bangsamoro parliamentary election, to prevent delays and the underutilization of funds.”

“At the same time, we will deepen governance reforms, strengthen transparency, streamline business processes, and rebuild investor confidence,” Balisacan said.

The DEPDev chief added that the government will also protect purchasing power and maintain price stability.

“Through the Unified Package for Livelihoods, Industry, Food, and Transport, or UPLIFT Framework, cash assistance and fuel and fertilizer subsidies will remain targeted toward vulnerable households and sectors. Digital delivery systems, stronger coordination with local governments, and accessible feedback mechanisms will help ensure that assistance is timely, accurate, responsive, and protected from leakage,” Balisacan said.

“We will also strengthen domestic supply conditions, particularly in food and energy. With close coordination with local governments and partner agencies, the Department of Agriculture will expand support for farmers and fisherfolk, maintain strategic food buffers, and fully operationalize the El Niño Strategic National Action Plan. We will reinforce energy security by promoting renewable energy generation, enhancing competition, and pursuing grid expansion and modernization to help ease pressure on electricity prices,” he added.

The country’s chief economist further said the government will build on the rebound in exports by strengthening competitiveness and widening market opportunities.

“The government is working to conclude trade negotiations with the European Union, Chile, and Canada, while seeking reconsideration of the United States' 12.5% tariffs on selected Philippine exports. We will reduce regulatory costs, modernize trade systems such as the Philippine National Single Window and TradeNet, and improve the reliability of ports, energy, and transport services,” the DEPDev chief said.

“We will position Philippine firms and workers to benefit from the global upturn in AI-related demand. We will support higher-value manufacturing and services, deepen our participation in global technology value chains, and accelerate workforce upskilling and reskilling through the Digital Workforce Competitiveness Act, among other measures. The resumption of new PEZA accreditations in Metro Manila will likewise support the expansion of outsourcing firms and global capability centers,” he added.

Presidential Communications Undersecretary Claire Castro, in a statement, said the Palace acknowledges that the country's economic growth in the second quarter.

“This result was lower than we had hoped. The numbers show the challenges we have faced, but they do not determine the country’s long-term direction. This slowdown is only temporary,” Castro said.

“It is the result of unusual events, especially the impact of the Middle East conflict, which has affected inflation, fuel prices, jobs, and remittances, along with a temporary slowdown in public construction as the government increased efforts to address corruption in infrastructure spending. As the government continues to speed up spending and release budgets more quickly, we hope the economy can start to pick up in the second half of the year as well,” she added.

The Palace official said the Marcos administration is focused on accelerating growth in the second half of the year by:

• Fast-tracking high-impact infrastructure projects.
• Maintaining price stability.
• Continuing targeted assistance for vulnerable sectors.
• Expanded UPLIFT assistance reaching 7.5 million families
• P12 per liter Fuel Subsidy Program
• Bawat Bayan Makikinabang Rice Program
• Expanding exports and improving competitiveness.
• Positioning the Philippines to benefit from the global AI and digital economy through investments in skills, technology, and higher-value industries.
• Pax Silica

Castro added that the government have key LEDAC measures that will support the middle class and consumption, namely:

• Proposed EPIRA amendments banning distribution utilities and electric cooperatives from passing system loss charges and their corresponding VAT onto ordinary consumers
• Sariling Kuryente Act
• Increase in the personal income tax exemption threshold to P350,000
• Minimum Corporate Income Tax (MCIT) exemption for small businesses
• General Tax Amnesty
• Travel Tax Abolition

–VAL/AOL, GMA News