PH economy seen to grow by 3% this year

MANILA, Philippines – The deceleration of the Philippine economy is expected to persist until the end of the Marcos administration, with economists at De La Salle University (DLSU) lowering their growth forecast for the year to 3.08 percent.

In its June Philippine Economy report, DLSU said the revised outlook is slightly lower than the 3.11 percent previously projected, as indicators continue to suggest that both global and domestic shocks are exacerbating an already weak economic environment.

READ: OECD cuts 2026 PH GDP growth forecast to 3.2%

“The Middle East conflict and Hormuz closure remains the single largest negative shock that continues to breed uncertainty into domestic growth prospects,” DLSU said.

“Furthermore, the ongoing political fiasco compounds the picture. On top of the flood control scandal that remains fully unresolved, the recent turbulence within the Senate could further provide a blow to the already pessimistic economic outlook that may further constrain foreign investment inflows,” it added.

The Philippine economy grew by 2.8 percent in the first quarter, the slowest pace recorded since the post-pandemic recovery period.

For the second and third quarters, DLSU economists project further weakening, with growth slowing to 2.5 percent and 2.2 percent, respectively.

“By then, the impact of the energy shock could be fully transmitted, the BSP (Bangko Sentral ng Pilipinas) rate hike cycle could reach the potential height of its demand-dampening effect and the impending food crisis (due to fertilizer cost surge and upcoming El Niño) could begin contracting agricultural output,” the report said.

A rebound is expected in the fourth quarter at 4.81 percent, although this is still below the government’s full-year growth target of 5 to 6 percent.

As it is, inflation has remained elevated, with the latest figure easing to 6.8 percent in May but still among the highest in three years. This prompted the central bank to raise its benchmark interest rate by a quarter point to 4.5 percent, with markets widely expecting the tightening cycle to extend further.

The projections come despite the DLSU economists already acknowledging the announcement that the United States and Iran had reached a tentative peace deal, effectively ending more than three months of war and reopening the Strait of Hormuz.

READ: Trump says US-Iran deal to be signed Sunday, Hormuz to open afterwards

According to them, growth prospects remain constrained, with medium-term projections staying below government targets. They forecast GDP growth at 3.4 percent in 2027 and 3.6 percent in 2028, compared with official targets of 5.5 to 6.5 percent and 6 to 7 percent, respectively.

The lowered 2026 forecast also reflects downward revisions across key demand indicators. Private consumption is expected to slow to 2.82 percent from 4.6 percent in 2025, making it the primary drag on overall growth. INQ