Philippines needs to grow at least 3.7% to hit target

THE PHILIPPINE ECONOMY must grow by at least 3.7% on average in the remaining three quarters of the year to meet the government’s revised growth target, the Department of Economy, Planning, and Development (DEPDev) said.

“For us to achieve the 3.5% (growth) target for the year, the average for the last three quarters must be 3.7%,” DEPDev Secretary Arsenio M. Balisacan said at a press briefing on Monday.

“And for us to achieve 4.5%, the average for the last three quarters must be 5.07%,” he added.

The Development Budget Coordination Committee recently revised its 2026 gross domestic product growth target to 3.5%-4.5% from 5%-6%, citing the possible escalation of the Middle East conflict, weak consumer and business confidence, and intensifying El Niño.

The economy expanded by just 2.8% in the first quarter, slowing from 3% in the previous quarter and 5.37% a year earlier.

“The first half of 2026 has been challenging. The economy faced a combination of domestic and external shocks that slowed growth and pushed inflation higher,” Mr. Balisacan said.

Weak public infrastructure since late 2025 and the escalation of the Middle East conflict has slowed economic activity, fueled inflation, and dampened business and consumer confidence, he said.

Despite these headwinds, Mr. Balisacan said economic conditions are expected to improve in the second half of the year, even as the second quarter likely remained weak.

“We expect much improvement in the second half. The second quarter will be a challenge because that’s the peak of the Middle East conflict,” he added.

The DEPDev chief said he expects government spending to pick up in the second half as agencies accelerate infrastructure implementation after delays earlier this year.

“We have been working closely with these agencies and we see that the second half will be a much more improved situation as far as infrastructure and government spending is concerned,” he added.

To support the recovery in the second half, Mr. Balisacan said the government is prioritizing the restoration of business confidence and accelerating growth through faster infrastructure implementation and stronger private investment.

The government will also focus on containing inflation; strengthening food and energy security; investing in education, healthcare, digital transformation and workforce development; and improving governance to sustain long-term productivity and inclusive growth.

“These priorities reinforce one another. Together, they will help us build an economy that grows faster, withstands shocks better, and creates more opportunities for every Filipino,” Mr. Balisacan said.

However, he said inflation remains a downside risk, with the Bangko Sentral ng Pilipinas expecting inflation to stay above its 2%-4% target for the rest of the year.

“So, we’ll still be challenged by inflation, but we are determined to get that inflation come down as fast as we can. But there are, of course, factors that are sometimes outside of our control, the government’s control,” the DEPDev chief said.

A BusinessWorld poll of 18 analysts yielded a median estimate of 6.6% for June inflation, easing from 6.8% in May but much faster than 1.4% a year earlier. This falls within the central bank’s 6%-7% projection for the month, but will mark the fourth consecutive month that it breached the 2%-4% tolerance range.

Mr. Balisacan also warned that weaker economic growth could put the Philippines’ newly attained upper-middle income country (UMIC) status at risk.

“As any of the countries under that list, the World Bank list, countries can go up or down depending on how they perform after the reclassification,” he said.

To maintain its upper-middle income classification, Mr. Balisacan said the government must bring inflation under control, pursue fiscal consolidation, improve competitiveness, and ensure productivity drives economic growth.

“If we are able to do that, then the risk of falling below the threshold again is much lower,” he added.

The World Bank’s latest country income classification showed the Philippines posted a record gross national income (GNI) per capita of $4,850, which is within the UMIC category for economies with GNI per capita ranging from $4,636 to $14,375.

Prior to this, the Philippines was in the World Bank’s lower-middle income bracket since 1987. — Justine Irish D. Tabile