The Philippine economy finds itself at a challenging period. With economic expansion slowing and prices rising, we face the challenge of ramping up infrastructure spending and social support to turn the period of global volatility into domestic resilience.
Per the Philippine Statistics Authority (PSA), our gross domestic product grew just 2.8 percent in the first quarter of 2026. The growth is a slowdown from the 5.4-percent expansion in the same period last year and marks the weakest performance in five years.
The economic cooling puts the government’s full-year growth target of 5 percent to 6 percent under pressure.
While the service sector managed to stay afloat, the industrial sector and the agriculture, forestry and fishing sectors both saw slight contractions. The first quarter also saw a decline in investment appetite, as the gross capital formation, which measures the country’s investment levels, dropped 3.3 percent.
The primary driver behind the slowdown is the ongoing conflict in the Middle East, which has caused global fuel prices to soar. Because the Philippines imports nearly all of its fuel, it is exposed to these external shocks. This has led to a ‘double whammy’ for Filipinos, with slower economic growth paired with a sharp spike in inflation.
Headline inflation soared to 7.2 percent in April from 4.1 percent in March. The surge was felt in transport costs and utility bills. Food inflation also picked up, with rice prices rising by over 13 percent and the costs of fish and vegetables also climbing.
These price hikes eat into the purchasing power of Filipino households and slow the consumer spending that usually drives our economy. Complicating the matter is the weak peso, which recently hit lows of 61 against the US dollar.
In response to these challenges, the government introduced the Unified Package for Livelihoods, Industry, Food and Transport, or UPLIFT. The framework is designed to be a comprehensive, whole-of-government approach to protect the most vulnerable sectors.
Per Department of Economy, Planning and Development (DEPDev) Secretary Arsenio Balisacan, the administration is focusing on targeted interventions to manage the prices of food, energy and transport. The goal is to ensure a stable supply of essential goods while providing a safety net for those hit hardest by the crisis. The Department of Energy is also working to secure fuel inventories, reporting that the country has enough supply to last nearly two months, with more deliveries on the way.
Meanwhile, the Land Transportation Franchising and Regulatory Board (LTFRB) is assisting drivers through financial aid and fuel subsidies to prevent public transport from becoming unaffordable for the commuting public.
The government’s strategy also extends to farmers, fishers and consumers. The Department of Agriculture has suspended loan repayments for farmers and fisherfolk for up to a year. They are also piloting new fertilization methods to reduce the reliance on expensive, petroleum-based fertilizers.
To help consumers directly, hundreds of ‘Kadiwa ng Pangulo’ sites have been established, allowing people to buy rice and other essentials directly from producers at lower prices.
The government also focuses on providing jobs. While the unemployment rate in March 2026 improved slightly to 5.0 percent from 5.1 percent in February, it remains higher than it was a year ago.
Secretary Balisacan said the government will pursue programs for job preservation, including reskilling and job-matching for workers who may have been displaced by the effects of the Middle East conflict. The Department of Foreign Affairs in the meantime is coordinating the safe return of overseas Filipino workers affected by the crisis abroad.
Some economists suggest that we should prepare for the full impact of the Middle East conflict in the second quarter. High inflation and potential interest rate hikes could dampen consumer sentiment even more.
This is precisely why a ‘business-as-usual’ approach will not suffice. The current economic cooling should be seen as a call to build more boldly.
Ramping up infrastructure spending will provide immediate employment for thousands of workers, putting money back into the pockets of Filipino families. Modernizing our roads, ports and digital networks can lower the cost of doing business and make our logistics more competitive.
Investing in the future, even during a crisis, signals stability to the private sector.
To regain our lead and meet our goal of catching up with our neighbors, we must bridge the investment gap. The government should also continue its targeted social protections to keep families afloat, while accelerating high-impact infrastructure projects that will fuel our growth.
By prioritizing these investments today, we ensure that the Philippines does not only survive the current global volatility but emerges from it as a more modern, efficient and resilient nation.