DESPITE the government’s expectation of stronger growth in the second half, a University of Asia and the Pacific (UAandP) economist said the Philippine economy is unlikely to stage a meaningful recovery in the remaining months of 2026.
‘We’re naturally optimistic at the university, but over the next five and a half months, there won’t be any recovery. If the economy grows by 3 percent, we’d already be very happy with that,’ UAandP economist Ronilo M. Balbieran said in an interview on Thursday.
Should the economy grow by around 3 percent, it would fall below the Development Budget Coordination Committee (DBCC)’s recalibrated gross domestic product (GDP) growth target of 3.5 to 4.5 percent this year.
It would likewise mark the fourth consecutive year that the Marcos administration has failed to meet its growth target.
According to Balbieran, one of the biggest risks to growth is the government’s continued underspending on infrastructure, which has limited the public sector’s ability to generate jobs and incomes at a time when households and businesses are grappling with rising costs.
Citing official data from the Department of Budget and Management (DBM), he pointed out that the government’s infrastructure spending has contracted more sharply than during the pandemic.
He noted that infrastructure spending fell by over 40 in the first four months of 2026, steeper than the 26 percent contraction recorded during the pandemic.
DBM data showed infrastructure and other capital outlays declined to P189.3 billion in January to April from P347.6 billion in the same period last year.
Balbieran said that increasing public investment remains the government’s most effective tool to support growth because infrastructure projects create employment, particularly in the construction sector, while generating demand for goods and services across the broader economy.
As workers earn more from these projects, they spend more on food, transportation, housing and other daily needs, helping stimulate demand and support businesses across other sectors, he explained.
‘When that particular portion of our labor force will have money, then that will actually have the demand pool for everything else, for all the sectors,’ Balbieran also said.
Aside from weak infrastructure spending, Balbieran said inflation has continued to weigh on household consumption-the country’s biggest driver of economic growth.
Based on Philippine Statistics Authority (PSA) data, household consumption grew by just 3 percent in the first quarter of 2026, slowing from 5.3 percent a year earlier.
The PSA said this was the weakest growth in household spending since the pandemic-era contraction in the first quarter of 2021. Excluding the pandemic years, it was the slowest pace since the third quarter of 2010.
Balbieran said consumers’ purchasing power has been squeezed by rising prices, a situation aggravated by the peso’s depreciation.
On Wednesday, the peso weakened to P61.75 against the US dollar, matching the record low it reached on May 18.
The weaker currency, Balbieran said, has also raised the cost of imported raw materials and goods, prompting businesses to pass on higher costs to consumers already grappling with more expensive fuel, electricity and transportation.
‘Double whammy on all the way to the final consumer because products and services will be higher aside from on top of our consumers already facing higher prices…everything gets messed up because you have higher prices, imported prices being multiplied by a higher exchange rate,’ he said.
The Philippine economy grew by 2.8 percent in the first quarter, marking its weakest expansion since 2021.
The PSA is scheduled to release second quarter GDP data on August 7.