Philippine economy posts slowest growth in five years in second quarter

MANILA, Aug 7 : The Philippine economy contracted in the second quarter, marking its slowest growth in five years, according to government data. According to the statistics agency, the economy expanded by 2.3% in the June quarter, falling short of the 2.8% median forecast in a Reuters poll and lower than the 2.8% expansion in the previous quarter. The first six months of the year saw growth of 2.6%, well below the government's 3.5% to 4.5% full-year target.

Economic Planning Secretary Arsenio Balisacan acknowledged the need for prompt action, stating that recent indicators suggest a cautious optimism that the economy may be entering the early stages of recovery. Balisacan highlighted infrastructure spending as a potential driver of growth, noting that work on approved projects is set to commence in the current quarter. He also pointed to surveys indicating improving business confidence and production conditions.

The government attributes the slowdown primarily to a corruption scandal involving flood-control projects, which has curtailed public spending and dampened investor sentiment, particularly in infrastructure projects. Construction activity contracted by 14.8% in the second quarter from a year earlier, worsening from a 4.3% decline in the first quarter.

Investment, which shrank by 9.2%, marked a fourth consecutive quarter of contraction. Household spending, which accounts for over two-thirds of economic activity, softened to 2.8% in the second quarter from 3.0% in the first quarter due to high inflation eroding purchasing power. Inflation averaged 5.0% over the first seven months of 2026, surpassing the government's 3.0% target.