THE Philippine economy may be running out of room for a comeback this year after growth slowed further to 2.3 percent in the second quarter, economists said.
On Friday, the Philippine Statistics Authority (PSA) reported that the second quarter growth eased from 2.8 percent in the first quarter and was significantly below the 5.4-percent expansion recorded a year earlier.
The latest reading was the slowest since the first quarter of 2021, when the economy contracted by 3.8 percent. Excluding the pandemic period, it was the weakest growth recorded since the fourth quarter of 2009, when gross domestic product (GDP) expanded by 1.8 percent.
This brought economic growth in the first half of 2026 to an average of 2.6 percent, significantly slower than the 5.4 percent recorded in the same period last year.
Former Socioeconomic Planning Secretary Dante B. Canlas said prospects for a strong recovery in the remaining half of the year appear dim, with both households and firms pulling back on spending.
‘There are no clear signs that these market agents will regain confidence. The year 2026 looks lost economically,’ Canlas told the BusinessMirror.
De La Salle University economist Ma. Ella C. Oplas was similarly downbeat, saying the government may once again miss its recalibrated growth target this year.
‘What is this saying about our state of economy? That we will not hit the targets this year,’ Oplas told the BusinessMirror.
She noted that the latest GDP figures reflect the cumulative impact of the economic challenges faced by households and businesses this year, with uncertainty increasingly weighing on spending decisions.
PSA data showed household consumption grew by just 2.8 percent in the second quarter, the slowest since the first quarter of 2021, when spending contracted by 4.8 percent.
Excluding the pandemic period, household spending growth was the weakest since the third quarter of 2010, when it expanded by 2.6 percent.
Oplas said some households simply do not have enough resources to spend, while others are holding back because they are unsure about future economic conditions.
She added that the slowdown also points to the limited impact of government measures intended to pump-prime the economy.
Cash assistance, she said, may either be insufficient or may not immediately translate into consumption as households stretch the aid to prepare for possible financial shocks.
‘As a result, the assistance does not really translate into consumer spending, which also affects the business sector. Less demand means less supply and less production,’ Oplas added.
Investment remains a drag
Investment likewise remained a major drag on growth, with gross capital formation contracting by 9.2 percent in the second quarter.
This marked another quarter of contraction after gross capital formation shrank by 2 percent in the third quarter, 9.4 percent in the fourth quarter, and 3.1 percent in the first quarter of 2026.
The deterioration was more pronounced in fixed investment. Gross fixed capital formation contracted by 13.7 percent in the second quarter, worsening from a 2.5 percent decline in the first quarter.
Construction was among the biggest drags, contracting by 14.8 percent year-on-year in the second quarter, much steeper than the 4.3 percent decline recorded in the previous quarter.
Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said the continued slump in public infrastructure indicates that it remains constrained even after the Independent Commission for Infrastructure (ICI) wrapped up its mandate earlier this year.
‘We’ve been arguing for some time that the end of the ICI’s mandate earlier this year would be no silver bullet in reviving public infrastructure projects,’ he said in a commentary.
Rebound in H2?
Socioeconomic Planning Secretary Arsenio M. Balisacan maintained on Friday that the lower end of the government’s recalibrated 3.5-to-4.5-percent growth target remains attainable, but the economy would have to expand by an average of at least 4.4 percent in the second half.
Balisacan is banking partly on a rebound in public infrastructure spending, noting that the Department of Budget and Management had started releasing mobilization funds for 2026 projects toward the end of June, while the Department of Public Works and Highways began awarding contracts in June and July.
He expects this to lift public construction beginning in the third quarter and gain further momentum in the succeeding months.
‘As you know, what was not spent in the previous quarters is still going to be spent, right? And the budget for the second half is already programmed,’ he said during a briefing.
The country’s chief economist also expects the proposed tax relief package under the Progress bill, once enacted, to help stimulate household spending by raising workers’ take-home pay.
Still, Balisacan acknowledged that weak consumption cannot be addressed by fiscal support alone, as elevated inflation and fragile consumer confidence have also prompted households to hold back on spending.
‘The task for us is to build that consumer and business confidence.Confidence that the future is good and that high prices are not likely the permanent thing moving forward,’ he added.
Private sector should come in
Economists, however, said the government may need to look beyond catch-up spending and fiscal pump-priming to generate a more durable recovery.
Canlas said the more promising sources of growth at this point are large-scale private investments planned under the Luzon Economic Corridor, including artificial intelligence hubs and rare-earth mining, provided these projects begin materializing within the year.
Oplas similarly argued that the private sector should play a bigger role if government spending is no longer generating the desired boost to economic activity.
She said this would require the government to intensify efforts to attract investments and support entrepreneurship, while providing businesses with the stability and predictability needed for long-term planning.
‘The government should really take our economic situation seriously and quit the political theatrics because they’re wasting our resources. People can see and feel the effects and it’s a heavy burden,’ she added.