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The Philippine economy grew 2.3% in the second quarter of 2026, slowing from 2.8% in the first quarter and 5.5% a year earlier
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The result marked the slowest quarterly growth since the pandemic period, reflecting continued weakness in domestic economic activity
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Wholesale and retail trade, education, and manufacturing were the main contributors to growth
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Household consumption rose 2.8%, while government spending increased 8.3%
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Exports grew 12.2%, but gross capital formation fell 9.2%
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Exports of goods surged 17% year-on-year; exports of services grew 6.9%; net exports contributed 1.2 percentage points to GDP growth
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Consumer electronics exports soared 230.3%; semiconductor exports grew 13.4%, both driven by surging global AI-related product demand
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Economy needs 4.4% growth in H2 2026 to meet the lower end of the government’s 3.5%-4.5% full-year target
The Philippine economy grew 2.3% in the second quarter of 2026, slowing from 2.8% in the first quarter and 5.5% a year earlier as weaker investment and decline in public construction weighed on overall domestic output.
Latest data from the Philippine Statistics Authority (PSA) indicated a further slowdown in economic growth, with gross domestic product (GDP) expanding at a slower pace despite gains in services, agriculture, government spending, and exports.
The main contributors to second-quarter growth were wholesale and retail trade; repair of motor vehicles and motorcycles, which grew 4.6%; education, 12.7%; and manufacturing, 2.6%.
Among the major sectors, services expanded 4.5% and agriculture, forestry and fishing grew 2.7%. Industry, however, contracted 2.4% during the quarter.
On the expenditure side, household final consumption expenditure increased 2.8%, while government final consumption expenditure grew 8.3%.
Exports of goods and services rose 12.2% and imports increased 5.5%. Gross capital formation, however, declined 9.2%, indicating continued weakness in investment activity.
Gross national income grew 2.2% year-on-year, while net primary income from the rest of the world increased 1%.
“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. However, government final consumption spending accelerated as social assistance was expanded to cushion vulnerable households and sectors,” said Department of Economy, Planning, and Development secretary Arsenio Balisacan in a statement on the country’s economic performance.
“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,” he added.
“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,” the DEPDev chief said.
Public works spending
He cited that the Department of Budget and Management began releasing mobilization funds for 2026 infrastructure projects to the Department of Public Works and Highways towards the end of June. Subsequently, the DPWH started awarding contracts during 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,” he noted.
Balisacan said the Bangko Sentral ng Pilipinas’ June business expectations survey revealed a “more optimistic outlook for the next three months.”
“The S&P Global Philippines Purchasing Managers’ Index also moved higher at the start of the third quarter. Together, these developments suggest improving business confidence and production conditions,” said Balisacan.
“To build on this emerging momentum and meet the government’s annual growth target of 3.5 to 4.5 percent, the economy must grow by at least 4.4 percent in the second semester. This will be demanding, but the target remains within reach if we act with urgency, discipline, and close coordination across government,” he explained.
PRIORITIES
He said the government’s top priority is to accelerate high-impact infrastructure projects through catch-up plans, clear milestones, and accountability measures, including seeking exemptions for projects affected by Bangsamoro election restrictions to prevent delays and underutilization of funds. Simultaneously, “deepen governance reforms, strengthen transparency, streamline business processes, and rebuild investor confidence.”
“Second, we will 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,” said Balisacan.
He added that initiatives will be undertaken to strengthen domestic supply, especially in food and energy, in collaboration with local governments and partners. The Department of Agriculture will support farmers, maintain food buffers, and implement the El Niño Action Plan. Including also boosting energy security through renewable energy, increased competition, and grid expansion to lower electricity costs.
“Third, we 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 percent tariffs on selected Philippine exports,” he said.
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Plans are underway to reduce regulatory costs, modernize trade systems such as the Philippine National Single Window, and improve the reliability of ports, energy, and transport services.
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The government will also position Philippine firms and workers to benefit from the global rise in AI demand. This includes supporting higher-value manufacturing and services, enhancing participation in global tech chains, and accelerating workforce upskilling through the Digital Workforce Competitiveness Act.
The renewal of Philippine Economic Zone Authority accreditations in Metro Manila will also facilitate the growth of outsourcing companies and international capability centers, Balisacan said.
