BUSINESS
Phl growth plunges from 7.6% to 2.3% under Marcos
There is cautious optimism that infrastructure projects in H2 2026 and improving business sentiment could support a recovery. But with growth at 2.3 percent, the government faces a difficult economic task: reviving investment and domestic demand without reigniting inflation pressures that previously forced policymakers to tighten monetary conditions.
The Philippine economy grew at its slowest pace in years in the second quarter of 2026, with gross domestic product (GDP) expanding just 2.3 percent, extending a broad slowdown from the post-pandemic rebound under President Ferdinand Marcos Jr.
The latest growth rate was down from 2.8 percent in the first quarter and 5.4 percent a year earlier, according to the Philippine Statistics Authority (PSA). It was the country’s weakest quarterly expansion since 2021.
First-half GDP growth stood at only 2.6 percent, well below the government’s 3.5- to 4.5-percent growth target for 2026.
The slowdown marks a sharp deceleration from the 7.6-percent growth recorded in 2022, when the economy was recovering strongly from the pandemic.
Annual growth subsequently eased to 5.5 percent in 2023, 5.7 percent in 2024 and 4.4 percent in 2025, based on the latest national accounts revisions.
Investment takes a hit
The biggest drag in the latest quarter was investment.
Gross capital formation contracted 9.2 percent, its fourth consecutive quarterly decline, while construction activity plunged 14.8 percent.
The weakness has been particularly evident in public construction, where project implementation has slowed amid stricter validation and scrutiny of government infrastructure projects.
The flood-control scandal has added another layer of uncertainty, with Economic Planning Secretary Arsenio Balisacan saying the controversy had affected public spending and investor confidence.
The slowdown in construction and investment has broader effects on the economy, hitting demand for materials, equipment, labor and related services.
Consumers also slow down
Household spending, traditionally a major engine of Philippine growth, expanded only 2.8 percent in the second quarter.
Elevated prices have continued to weigh on consumers’ purchasing power. Inflation accelerated sharply during the second quarter, reaching 7.2 percent in April, 6.8 percent in May and 6.4 percent in June.
Higher food, fuel and other household costs leave consumers with less room for discretionary spending, weakening domestic demand.
Rates, uncertainty weigh on economy
The slowdown comes after years of monetary tightening that began in response to the inflation surge of 2022.
The Bangko Sentral ng Pilipinas raised its policy rate aggressively during 2022 and 2023 to bring inflation under control. Higher borrowing costs can discourage businesses from expanding and households from taking on loans.
By 2026, however, the BSP was balancing support for economic activity against renewed inflation and external risks.
The BSP’s first-quarter report cited weaker domestic demand, subdued investment, public-construction weakness and softer household spending as major factors behind the slowdown. It also pointed to higher fuel costs and heightened global uncertainty.
The growth problem
The latest figures point to more than a temporary slowdown in one sector.
The Philippines is growing at only 2.3 percent while investment is contracting, construction is plunging and household spending is weakening.
At the same time, the government faces the challenge of restoring confidence in public infrastructure spending while dealing with inflation and global economic uncertainty.