The Philippine economy grew by 2.8% in the first quarter of 2026, a significant slowdown from the 5.4% expansion in the same quarter last year and the slowest pace since the 3.8% contraction in Q1 2021. Excluding the pandemic, this represents the weakest growth since Q4 2009's 1.8%. This figure also fell short of the government's 5-6% target for the year and the 4.4% median forecast from a BusinessWorld poll of 21 economists.
The Department of Economy, Planning, and Development (DEPDev) attributed the sluggish growth to several factors: the Middle East conflict, which caused soaring global oil prices and renewed supply chain pressures, and domestic issues including the lingering effects of a corruption scandal from the previous year and delays in the release of the 2026 national budget. The Philippines, being a net importer of crude oil, was acutely affected by the oil price surge.
Key economic indicators show the impact: investment fell by 3.3% in the first quarter, and industrial production edged down by 0.1%. While consumer spending rose by 3% and government expenditure by 4.8%, overall household spending was the weakest since 2010. The central bank faces limited options to support the economy due to peso weakness and surging consumer prices, which accelerated to an average of 6.8% in the second quarter, up from 1.4% a year ago.
Economists are projecting continued slow growth, with a BusinessWorld poll indicating a median GDP growth estimate of 2.8% for the second quarter (April-to-June period). If realized, this would match the first quarter's performance and bring the average GDP growth for the first half of the year to 2.8%, falling below the government’s 3.5%-4.5% full-year target. The Middle East crisis and its effects on oil prices and geopolitical uncertainty are expected to continue dampening business confidence and economic activity.
The Philippine peso has become the worst-performing currency in Asia since the start of the conflict, and its stock market is the second-worst globally. Economic Planning Secretary Arsenio Balisacan noted that the country's growth performance lags behind regional peers like Vietnam, Indonesia, and China. The nation is considered to be at high risk of stagflation—a combination of weak growth, high inflation, and unemployment—according to Lavanya Venkateswaran, a senior ASEAN economist at Oversea-Chinese Banking Corp.
