8 May 2026 – Philippine economy crawls by 2.8% in 1st quarter

Slowest growth in 5 years

MANILA, Philippines —  The Philippine economy posted its slowest growth in five years in the first quarter as household spending softened, investments fell and global oil shocks weighed on confidence, prompting the government to lower its growth target for the year.

The Philippine Statistics Authority (PSA) reported that gross domestic product grew by just 2.8 percent in the first quarter, lower than the 5.4 percent expansion in the same quarter last year and the three percent GDP growth in the fourth quarter of 2025

This was the weakest performance since the first quarter of 2021, when the economy contracted by 3.8 percent at the height of the pandemic, National Statistician Claire Dennis Mapa said.

It also missed the government’s current growth target of five to six percent for the year.

Department of Economy, Planning and Development Secretary Arsenio Balisacan said the Development Budget Coordination Committee would lower the country’s economic growth target when it meets next week.

“We will definitely move our growth targets lower because given the situation, especially the global uncertainty remaining highly elevated, our Middle East conflict assumptions will no longer hold,” Balisacan said during a media briefing yesterday.

He said a downward revision was already a “foregone conclusion” given the weaker first-quarter outturn and the still uncertain external environment.

“Our program is dynamic. We have to adjust when situations change. You can’t keep insisting on something that’s no longer attainable. The world has changed so much since last year,” he said.

Balisacan said the economy was hit by a combination of domestic and external shocks, including the lingering impact of the flood control corruption controversy on consumer and investor confidence, delays in the passage and release of the 2026 national budget as well as the escalation of the Middle East conflict.

He said the conflict pushed global oil prices higher and renewed supply chain pressures, creating additional risks for oil-importing economies such as the Philippines.

“Even as the Middle East conflict ends today, the lingering effects of the supply chain disruptions will persist in the coming months. So there are continuing challenges ahead,” he said.

The PSA said services remained the main driver of growth, expanding by 4.5 percent in the first quarter. However, this was significantly slower than the 6.2 percent growth in the same period last year.

The main contributors to GDP growth were wholesale and retail trade, repair of motor vehicles and motorcycles (4.6 percent), financial and insurance activities (3.4 percent) and public administration and defense, compulsory social security (8.6 percent).

On the demand side, household final consumption expenditure, which accounts for about three-fourths of the economy, slowed to three percent from 5.3 percent a year ago. Mapa said it was also the weakest since the first quarter of 2021, when it contracted by 4.8 percent.

He said inflation and weak consumer sentiment likely weighed on household spending. Food and non-alcoholic beverages, the largest component of household consumption, grew by just 0.3 percent in the first quarter, making it “almost flat.”

Gross capital formation, a measure of investment, declined by 3.3 percent in the first quarter, reversing the 4.5 percent growth recorded a year earlier. The PSA said the contraction was mainly due to construction, which fell by 4.5 percent as general government construction plunged by 31.5 percent.

Industry remained weak as construction declined by 2.8 percent, while manufacturing growth slowed to 0.5 percent from 4.3 percent a year ago. Mining and quarrying, however, accelerated to 3.8 percent from 2.1 percent.

Agriculture, forestry and fishing slipped by 0.2 percent, dragged by lower output of palay, fishing and aquaculture and corn. Palay declined by 6.3 percent, fishing and aquaculture by five percent and corn by 5.5 percent.

Government final consumption expenditure grew by only 4.8 percent, slower than the 18.7 percent expansion in the first quarter of 2025. Exports of goods and services rose by 7.8 percent, while imports grew by 6.1 percent.

Balisacan said part of the weak first-quarter performance reflected delays in the implementation of government programs, particularly infrastructure. He said agencies are now being pushed to catch up in the coming months.

“The President has also directed implementing agencies to accelerate the execution of high-impact infrastructure projects in the coming months,” Balisacan said. “Their catch-up plans must be guided by clear milestones, sound risk management and strong accountability mechanisms.”

He said reforms are being pursued to improve transparency, accountability and efficiency in government processes, including the digitalization of budget procedures, faster approval systems and stronger project monitoring mechanisms.

Despite the slowdown, Balisacan rejected concerns that the Philippines is slipping into stagflation or returning to its old “sick man” label, saying the country’s fundamentals are different from past crisis periods.

“Our potential growth remains to be six percent. It’s just getting that confidence and sentiment (back),” he said in a chance interview.  “I don’t think that it’s correct to say that we are back to being the sick man so far.”