NOMURA Global Markets Research has cut its 2026 growth forecast for the Philippines following a slowdown in the second quarter, as foreign research firms see only a gradual recovery in the second half amid weak investment and still-elevated prices.
Nomura on Sunday lowered its full-year gross domestic product (GDP) growth forecast to 3.8 percent from 4.6 percent, although it still expects economic activity to improve in the latter half of the year.
This comes as the Philippine economy grew by 2.3 percent in the second quarter, slower than the 2.8-percent expansion in the first three months of the year and the weakest quarterly growth since the first quarter of 2021.
Excluding the pandemic period, it was the slowest expansion since the fourth quarter of 2009, when GDP grew by 1.8 percent.
This brought average growth in the first half to 2.6 percent, less than half the 5.4 percent recorded in the same period last year.
‘We cut our 2026 GDP growth forecast to 3.8 percent from 4.6 percent, which still pencils in an improvement in H2. We maintain our call for two more 25-basis-point Bangko Sentral ng Pilipinas’ hikes this year,’ Nomura said.
On a seasonally adjusted basis, the economy expanded by 0.6 percent quarter-on-quarter in the second quarter, slower than the 0.9 percent growth in the first quarter.
Nomura said the further moderation indicated that the economy continued to lose momentum rather than begin to recover from the prolonged slowdown associated with the flood-control corruption controversy.
‘This suggests the impact of the war in Iran has likely exacerbated some lingering spillover effects on private sector spending from the sharp fiscal tightening and associated governance concerns, hurting domestic demand overall,’ it added.
Infra-led recovery
ANZ Research and Capital Economics likewise expect growth to improve in the coming quarters, although both see constraints to a stronger rebound.
ANZ said a recovery in public infrastructure spending beginning in the third quarter could help revive capital formation, which emerged as one of the biggest drags on second-quarter growth.
‘Steady normalization of public infrastructure spending will be key for a meaningful recovery in GDP growth in the upcoming quarters,’ ANZ Research said.
The Department of Economy, Planning, and Development (DepDev) earlier said it was banking partly on a rebound in infrastructure spending after the Department of Budget and Management began releasing mobilization funds for 2026 projects toward the end of June.
The Department of Public Works and Highways also started awarding contracts in June and July, which DepDev expects to support a pickup in public construction beginning in the third quarter and gain momentum in the succeeding months.
Capital Economics, meanwhile, expects only a modest improvement after the weak first-half performance.
‘Growth should improve a little from here, but the recovery will be very gradual. The recent falls in oil prices, if sustained, will help reduce inflation and boost the purchasing power of consumers. But the corruption scandal is unlikely to go away,’ it explained.
The research firm said President Marcos’s renewed emphasis on combating corruption in his fifth State of the Nation Address (Sona) suggests that tighter scrutiny surrounding public projects could continue to weigh on investment.
It added, however, that continued economic weakness could put pressure on the government to ease the constraints on public investment arising from its anti-corruption drive.
Capital Economics expects GDP to grow by around 3 percent this year, while ANZ forecasts a 3.9-percent expansion.
The Development Budget Coordination Committee (DBCC) in late June lowered its 2026 growth target to a range of 3.5 to 4.5 percent from 5 to 6 percent, citing weaker-than-expected economic performance following the flood-control controversy and the economic fallout from the Middle East conflict.
Growth targets for 2027 to 2030 were likewise reduced to 5 to 6 percent. The previous targets were 5.5 to 6.5 percent for 2027 and 6 to 7 percent for 2028 to 2030.