Gov't spending likely fueled faster Q2 GDP growth
Published Aug 3, 2026 12:00 am
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Updated Aug 1, 2026 05:45 pm
Philippine economic growth likely picked up above the three-percent level in the second quarter, mainly on improved spending on public goods and services, with most private-sector economists expecting the economy to perform better than in the previous quarter despite lingering headwinds from expensive oil and domestic political uncertainty.
Ahead of the government’s report on the second-quarter gross domestic product (GDP) performance on Friday, Aug. 7, four of five private-sector institutions expect faster growth than the first quarter’s 2.8 percent, with forecasts ranging from two percent to 3.5 percent.
Dutch financial giant ING projects the strongest expansion at 3.5 percent, saying second-quarter GDP growth is “expected to remain subdued... as elevated oil prices and continued political uncertainty keep investment activity muted.”
ING nonetheless said “government spending should begin to recover after contracting in the second half of 2025, providing some support to domestic demand,” while second-quarter export growth is likely stronger as the Philippines benefits from deeper integration into the artificial intelligence (AI) supply chain.
The government reported last week that merchandise exports rose 13 percent to a record $46.72 billion in the first half of the year, the highest January-to-June level since 1991, driven by strong demand for key products and expanded market access.
In June alone, goods exports jumped 24.1 percent to an all-time monthly high of $8.77 billion, led by electronic products, with the United States (US) remaining the country's top export market, the latest Philippine Statistics Authority (PSA) data showed.
But ING cautions that higher prices of imported oil and non-oil products could “weigh on the trade balance, resulting in a smaller net contribution from external demand to overall GDP growth.” The Philippines is a net importer of the goods it consumes.
Singapore-based DBS Bank Ltd. forecasts second-quarter Philippine GDP growth of three percent, as it is “expected to show signs of bottoming out but remain at modest levels.”
Moving forward, “inflation outcomes will benefit from a temporary pullback in global energy prices, but food costs are set to turn dearer on El Niño risks in the Philippines,” DBS said.
London-based think tank Capital Economics also forecasts three-percent growth for the second quarter, but warned that the economic drag from the multibillion-peso flood-control corruption scandal is likely to persist.
“The second-quarter GDP figures... are likely to show the continued impact of the crisis on the economy. With the government procurement freeze unlikely to be resolved quickly, we expect growth in the Philippines to underperform over the coming quarters,” Capital Economics senior Asia economist Gareth Leather said.
The think tank said that President Ferdinand R. Marcos Jr.’s penultimate State of the Nation Address (SONA) last week “suggests that the anti-corruption campaign still has further to run,” pointing to continued scrutiny of public works projects that could keep investment demand weak and big-ticket infrastructure delayed in the near term.
Singapore-based United Overseas Bank Ltd. (UOB) is the most cautious among the institutions, projecting only two-percent GDP growth for the second quarter, even lower than the first-quarter expansion.
Meanwhile, Japanese financial giant MUFG Bank Ltd. did not provide its own numerical forecast but said the Philippines’ GDP is “expected to show some marginal improvement on better government spending” in the second quarter.
To recall, the Philippine economy grew by just 2.8 percent in the first quarter as the impact of last year’s flood-control scandal on both public and private spending lingered at the start of this year. - Danielle T. Bayani