Philippine GDP growth sharply slows in Q2 2026

The Philippine economy sharply slowed in the second quarter as the Middle East conflict drove up inflation and weighed on household spending and investments.

Gross domestic product (GDP) grew by 2.3% in the second quarter from a year earlier, slowing from the 5.4% expansion in the same quarter last year and the 2.8% growth in the first quarter.

This is below the median GDP estimate of 2.8% in a BusinessWorld poll of 21 economists and analysts last week. It was also the slowest expansion since the fourth quarter of 2009, excluding the pandemic.

“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,” Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio M. Balisacan said during a press briefing on Friday.

“However, government final consumption spending accelerated as social assistance was expanded to cushion vulnerable households and sectors,” he added.

On the demand side, household final consumption expenditure expanded by 2.8% in the April to June period, while government final consumption expenditure grew by 8.3%.

Exports of goods and services; and imports of goods and services expanded by 12.2%, and 5.5%, respectively. Gross capital formation contracted by 9.2% in the second quarter.

PSA data showed the main contributors to the second quarter year-on-year growth were wholesale and retail trade; repair of motor vehicles and motorcycles at 4.6%; education at 12.7%; and manufacturing at 2.6%.

Among major economic sectors, agriculture, forestry, and fishing grew by 2.7%, while services expanded by 4.5%. However, industry declined year-on-year by 2.4%.

“There were also clear areas of strength. Agricultural output recovered with the help of favorable weather conditions. Manufacturing growth improved, while exports of goods and services gained momentum. Stronger semiconductor exports, supported by global demand for AI-related products, helped net exports rebound during this semester or the quarter,” Mr. Balisacan said.

For the first semester, GDP growth averaged 2.6%.

Mr. Balisacan said Philippine GDP must grow by 4.4% in the second half to reach the 3.5-4.5% growth target for 2026. — Cathy Rose A. Garcia