THE Philippine economy may struggle to meet even the 3.3-percent growth forecast of BMI, a unit of Fitch Solutions, as weaker-than-expected activity in the third quarter raises downside risks to the country’s full-year growth outlook.
BMI said early indicators suggest that the economy entered the third quarter with ‘less momentum than anticipated,’ putting its 2026 growth forecast at risk.
The research firm currently expects the Philippine economy to grow by 3.3 percent this year, below the government’s 3.5- to 4.5-percent target range.
With the economy expanding by 2.6 percent in the first half, growth would need to accelerate to at least 3.9 percent in the second half to meet BMI’s full-year forecast.
‘While we had expected public capex and a low base to underpin this recovery, early indicators suggest that the economy entered Q3 with less momentum than anticipated,’ BMI said.
The economy grew by 2.3 percent in the second quarter, bringing first-half growth to 2.6 percent, significantly slower than the 5.4-percent expansion recorded in the same period last year.
BMI said investment, which it had expected to support the recovery in the third quarter, appeared to have remained weak.
The research firm said the renewed scrutiny surrounding the flood-control investigation likely delayed project implementation further, weighing on both public and private construction.
‘The increased scrutiny probably delayed project implementation further, weighing on both public and private construction,’ BMI said.
Official data showed that investment remained a major drag on growth, with gross capital formation contracting by 9.2 percent year-on-year in the second quarter.
Gross fixed capital formation, meanwhile, contracted by 13.7 percent in the second quarter, worsening from the 2.5 percent decline in the first quarter. Construction also contracted by 14.8 percent, compared with a 4.3 percent decline in the previous quarter.
BMI said weaker public capital spending in the third quarter could prompt it to cut its 2026 growth forecast by around 0.2 percentage point to 3.1 percent, if July-August capital-outlay data confirm its assessment.
The firm also flagged continued weakness in private consumption, as elevated inflation eroded household purchasing power and discouraged discretionary spending.
This was compounded by deteriorating labor-market conditions, with unemployment rising to 6.0 percent in July from 4.9 percent in June, a four-year high.
While BMI noted that the June-July period typically brings an influx of new graduates into the workforce, it said the scale of the increase pointed to broader labor-market weakness, reinforcing household caution.
Severe weather also weighed on economic activity, with tropical storms and monsoon flooding causing repeated school and workplace closures.
Preliminary estimates from the National Disaster Risk Reduction and Management Council (NDRRMC) showed infrastructure damage due to recent typhoons reached P14.3 billion, while agricultural losses were around P4.4 billion.
‘These weather-related disruptions are likely to further reduce the likelihood of a meaningful rebound in Q3 growth,’ BMI said.