Gross domestic product (GDP) growth likely slowed further to 1.9 percent in the second quarter of 2026 as persistently weak public infrastructure spending, coupled with softer household consumption and private investment amid the ongoing energy shock, continued to weigh on the economy, according to Bank of the Philippine Islands (BPI) Lead Economist Emilio Neri Jr.

In a commentary released Friday, Neri said that if BPI's forecast proves accurate, the 1.9 percent expansion would mark the country's slowest quarterly economic growth since 2009, excluding the pandemic years.

"Public infrastructure spending continued to weigh heavily on economic activity, contracting by 43.4 percent year on year in the second quarter after a 45.4 percent decline in the first quarter, amid ongoing project delays and slower-than-expected budget execution," he said.

"Private investment likely softened further, as reflected in weaker building permit approvals and subdued business sentiment, with firms adopting a more cautious stance amid policy uncertainty," Neri added.

Economic growth has weakened significantly since the flood control scandal erupted in the second half of last year, as investigations into the government's latest corruption controversy triggered a sharp slowdown in public infrastructure spending.

GDP growth slowed for a third consecutive quarter in the first three months of the year, settling at 2.8 percent. Government officials attributed the weaker performance to continued delays in infrastructure spending and the onset of the energy shock in March.

Neri said the second quarter reflected the full economic impact of the US-Iran conflict, which began in March toward the end of the first quarter, as elevated oil prices and heightened geopolitical uncertainty further dampened business confidence and overall economic activity.

"These headwinds may have been partly offset by relatively solid exports, particularly AI-related electronics, alongside continued strength in electric vehicle- and solar-related demand, providing pockets of support to manufacturing and domestic economic activity," Neri said.

Risk management consulting firm PSA Intelligence likewise said household consumption—the main driver of the Philippine economy—slowed as inflation accelerated to a three-year high in April due to the Gulf conflict.

"Faster inflation from oil supply shocks led to a two-percent drop in household consumption, which makes up around 70 percent of the local economy," the firm said.

"Investments (gross capital formation) also declined by 3.3 percent, driven by the contraction in government infrastructure construction amid continued scrutiny of public sector corruption," it added, noting that second-quarter GDP growth could slow to as low as 1.42 percent.

Despite the weak outlook, Neri said the economy could rebound in the second half of the year.

"The year-on-year comparison could become more favorable as the adverse effects of last year's public infrastructure issues and implementation delays first began to materialize in the third quarter of 2025. Meanwhile, signs of de-escalation in the Middle East could help ease pressure on production costs and support business sentiment," he said.

President Ferdinand R. Marcos Jr. also reaffirmed his administration's commitment to pursuing key infrastructure projects during his State of the Nation Address last Monday.

"As I have said, all public infrastructure must be of high quality, durable, and provide lasting benefits to the Filipino people," the President said in Filipino.

"But we cannot allow [infrastructure projects] to stop or be disrupted because they serve as the piston of our economy."