But DEPDev says recovery in sight with rising public construction
MANILA — The Philippine economy grew 2.3 percent in the second quarter, the slowest since the pandemic, the Philippine Statistics Authority reported on Friday.
This was slower than the 2.8 percent clip seen in the first quarter, and much slower than the 5.4 percent growth booked in the second quarter of 2025.
The Department of Economy, Planning and Development said economic expansion was weighed down by subdued domestic demand and declining public construction. The latest figures bring first-semester growth to 2.6 percent, meaning the country faces a steep climb to meet its annual growth target of 3.5 to 4.5 percent.
To hit that goal, "the economy must grow by at least 4.4 percent in the second semester," said DEPDev Secretary Arsenio Balisacan. Balisacan noted that total investment contracted and household consumption growth moderated amid "higher inflation, job losses, and lower remittance receipts arising from the Middle East conflict."
From fastest to slowest growing
The lackluster first-half growth figures mean that the Philippines has dropped from being one of the fastest-growing economies in Southeast Asia to one of the slowest.
Balisacan, however, said that this situation was not going to last.
“What we are experiencing right now is, I believe, is transitory, it's temporary. We are making efforts to get back to the high-growth trajectory,” he said.
He said that recent events have shown that the country needs to make itself more resilient to global energy shocks.
“The situation we are in brings us lessons, particularly in the management of our energy sector. We have become very vulnerable to developing global supply chain disruptions as a result of the very high dependence of our economy on imported fuel. We are pushing all the buttons we can to address that issue, particularly in ensuring that we'll have more locally dependable sources of power, especially, for example, from renewable energy, solar power deployment, [and] developing our geothermal and water resources.”
The government also plans to protect consumer purchasing power through targeted cash and fuel subsidies.
Infra spending to accelerate
Balisacan noted that public construction, especially in the Department of Public Works and Highways, was still affected by constraints arising from the massive corruption scandal last year. But he added that disbursements by the Department of Budget and Management on infrastructure spending was picking up pace.
“We are now seeing that contracts are now issued, have started to be issued by DPWH starting in June and July and we expect those to accelerate in the coming months,” Balisacan said.
“DBM also has, as I mentioned earlier, released the mobilization using 20 percent of the project cost for all those projects of DPWH and we expect that as progress continues, releases will follow. So I think the second half, particularly even in the fourth quarter especially, I would expect major developments in the public construction moving forward,” he added.
He said the government was looking to accelerate high-impact infrastructure projects.
Record exports amid AI boom
Balisacan also highlighted the impact of the global AI boom on Philippine exports.
“In the past two quarters, you may have noticed that exports have performed much better. And in fact, I have not seen that kind of performance in many years when exports are not doing much better than imports,” the country’s chief economist said.
Data from the PSA showed that in June alone, exports of electronics hit $5.3 billion, up 35.2 percent from the previous year. Electronics made up 60 percent of the Philippines’ total exports, with consumer electronics posting the biggest gain, growing 335.2 percent.
“So our thrust is to continue improving the momentum, especially [in] placing the economy, moving the economy to AI-centric, to high-skill labs. And our hands are pushed for upskilling, because to us, that's very critical that we are able to diversify the sources of growth, not just from consumption, but from investment also as well as in exports,” Balisacan said.
The government also highlighted the recovery in agricultural output due to favorable weather.
Recent upticks in business confidence and public spending give officials "reason for cautious optimism that the economy may already be entering the early stages of recovery," Balisacan added.
Economic growth has been slowing significantly since last year, when a corruption scandal put the brakes on government spending, especially the very important growth driver of public infrastructure construction. This year, the Middle East conflict has also pushed prices of fuel and other commodities up, further dampening growth.
Last June, the Development Budget Coordination Committee (DBCC) revised the 2026 growth target down to 3.5 to 4.5 percent.
Multilateral lenders such as the Asian Development Bank and the International Monetary Fund have also cut growth forecasts for the Philippines.