After a weak first half and a potentially sluggish third quarter, Philippine economic growth could recover to more than 4 percent in the last three months of the year amid a massive catch-up in infrastructure spending.
This is according to economists at the University of Asia and the Pacific (UAandP), who said they expect third-quarter growth to remain tepid at around 2.3 percent. Still, they said some ‘green shoots’ have begun to emerge.
‘Short-term pressures from oil volatility and trade deficits may push the peso toward P63/$1, yet a massive infrastructure surge and solid fundamentals will propel economic growth past 4 percent in the fourth quarter,’ UAandP said in its latest report.
‘Historic June milestones, including record employment of 50.7 million, an export surge to $8.8 billion, and peak OFW remittances of $3.4 billion, generate strong momentum,’ it added. ‘This solid baseline helps the economy absorb the temporary third-quarter slowdown that August floodings and spending delays created.’
If realized, the forecast would fall within the Marcos administration’s revised growth target of 3.5 percent to 4.5 percent for 2026.
Philippine economic growth averaged 2.6 percent in the first half of the year, mainly dragged by the peak fallout from the Middle East war and a slowdown in government spending.
The government is now banking on a catch-up in infrastructure spending in the second half to help revive the economy. It has slated P579.74 billion for disbursement on infrastructure and other capital outlays in the third and fourth quarters.
The Department of Budget and Management has said it had already released allotments to the Department of Public Works and Highways (DPWH) to allow the agency to implement its projects in August and September.
Data as of July showed that the DPWH had already received 99.5 percent of its P530.12-billion budget. This comes as infrastructure spending from January to June fell 40 percent to P367.4 billion.
On inflation, UAandP economists see one last quarter-point rate hike from the Bangko Sentral ng Pilipinas this year amid cooling price pressures, which would bring the cumulative increase in policy rates to 100 basis points.
Still, they expect financial markets to remain volatile in the near term as elevated bond yields in advanced economies put pressure on local assets, although Philippine stocks remain attractive for long-term investors.