THE Philippine economy may once again fall short of the Marcos administration’s growth ambitions, as two international organizations cut their 2026 forecasts amid weaker investment and household spending.
SandP Global Ratings on Wednesday lowered its 2026 gross domestic product (GDP) growth forecast for the Philippines to 2.9 percent from 4.1 percent previously, a 1.2-percentage-point downgrade.
The Asian Development Bank (ADB), meanwhile, trimmed its growth forecast to 3.3 percent from 3.8 percent, or a 0.5-percentage-point reduction.
If either forecast materializes, the Philippines would miss the Development Budget Coordination Committee’s (DBCC) annual growth target for the fourth consecutive year since President Marcos Jr. took office.
‘We have lowered our growth forecast for 2026, reflecting the weaker-than-expected first-half growth and a more gradual recovery trajectory,’ SandP Global economist Vishrut Rana told the BusinessMirror in an email interview.
The Philippine economy grew by just 2.6 percent in the first half of 2026, sharply slower than the 5.4 percent expansion recorded in the same period last year.
According to SandP, the Philippines was a ‘notable exception’ to the resilience in domestic demand seen across Asia and the Pacific, pointing to continued weakness in investment.
Data from the Philippine Statistics Authority (PSA) showed that gross capital formation, which measures investment in the economy, contracted by 9.2 percent in the second quarter of 2026.
This marked another quarter of contraction after gross capital formation shrank by 2 percent in the third quarter of 2025, 9.4 percent in the fourth quarter, and 3.1 percent in the first quarter of 2026.
Fixed investment also contracted by 13.7 percent in the second quarter, widening from the 2.5 percent decline in the first quarter. Construction likewise contracted by 14.8 percent, compared with a 4.3 percent contraction in the previous quarter.
Rana said the recovery in investment would take time, with public capital expenditure expected to gradually normalize as infrastructure projects resume.
‘Given strong reforms in the space to increase transparency and efficiency, it will take time for disbursements to ramp up,’ he added.
Data from the Department of Budget and Management showed that infrastructure and capital outlays, a measure of government capital spending, fell to P367.14 billion in the first half of 2026, down 40.8 percent from P620.2 billion in the same period last year.
The DBM earlier said infrastructure disbursements by the Department of Public Works and Highways (DPWH) were affected by tighter payment validation, audit and documentary requirements aimed at ensuring that releases are made only for properly documented and verified projects that comply with government rules.
Meanwhile, ADB Philippines Senior Economist Teresa Mendoza also identified weaker household spending amid elevated inflation and weak consumer confidence as another drag on growth this year.
‘The impacts increasingly spread to the broader economy, including a slowdown in several services subsectors,’ Mendoza said during a briefing.
PSA data showed household consumption grew by just 2.8 percent in the second quarter, the slowest since the pandemic-induced first quarter of 2021, when household 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.
El Niño poses risk to inflation
Although the ADB expects Philippine growth to recover in 2027, it warned that the outlook remains vulnerable to the effects of a potentially strong El Niño from late this year through 2027.
‘Key risks stem from worsening of geopolitical tensions and extreme weather shocks, including worse than expected El Nino impacts, which could intensify further inflationary pressures,’ ADB Philippines Senior Economist Teresa Mendoza said.
The ADB expects growth to rebound to 5.1 percent in 2027, although this is slightly lower than its previous forecast of 5.3 percent.
On inflation, the bank retained its 5.9 percent forecast for 2026, while raising its 2027 projection to 4.4 percent as food prices, particularly rice, are expected to remain elevated amid El Niño.
SandP Global also expects the Philippines’s growth to recover next year, although it trimmed its 2027 forecast to 5.4 percent from 5.8 percent previously.
‘Elevated energy and food prices, together with the resulting tighter monetary policy, will continue to weigh on domestic demand. Amid these factors, we have also lowered our 2027 growth projection modestly,’ Rana said.
SandP Global expects Philippine inflation to average 5.5 percent this year before easing to 3.6 percent in 2027.
Earlier, the Philippine Atmospheric, Geophysical and Astronomical Services Administration (Pagasa) warned of a 60 percent or higher reduction in average monthly rainfall in some areas through the end of the year.
The government also reactivated the Task Force El Niño in June to coordinate measures aimed at mitigating the phenomenon’s impact on agriculture and vulnerable communities.