‘Softer Q3 growth may put 2026 target at risk’

The Philippine economy is expected to grow at a softer pace in the third quarter, potentially jeopardizing the government's 3.3 percent full-year 2026 growth target, according to research firm BMI. Early data indicates the economy had less momentum than anticipated when entering Q3, raising concerns about the downside risks to the growth forecast.

BMI noted that the economy expanded by 2.6 percent in the first half of the year, and would need to grow by at least 3.9 percent in the second half to hit the full-year projection. However, factors such as weakened public capex, high inflation, rising unemployment, and weather-related disruptions like tropical storms and flooding are likely to hinder growth, potentially reducing the forecast by around 0.2 percentage points to 3.1 percent.

While positive indicators such as manufacturing expansion and continued export growth are expected, they may not offset the weaker investment and consumption. BMI expects inflation to average 5.7 percent in 2026, below the Bank of the Philippines' latest projection of 6.1 percent, depending on a United States-Iran deal by end-September. The unemployment rate rose to 6 percent in July, the highest in over four years.

BMI forecasts that the Bangko Sentral ng Pilipinas (BSP) will keep the key policy rate unchanged for the rest of the year due to the slow growth, but will reassess after the September inflation release. The BSP raised the key policy rate by 25 basis points to 5 percent during their last meeting.