Global investment banking giant Goldman Sachs holds a more somber outlook for the Philippine economy after the post-pandemic low growth seen in the second quarter of 2026, citing muted consumer demand amid high inflation and slowing remittances from overseas Filipinos (OFs).

Gross domestic product (GDP) growth moderated further in the second quarter to 2.3 percent from 2.8 percent in the first quarter.

As a direct result of the weaker-than-expected data, Goldman Sachs Economics Research lowered its full-year 2026 GDP growth forecast to 3.3 percent from 3.5 percent previously, an Aug. 7 report obtained by Manila Bulletin showed.

Goldman Sachs said that the outlook, especially for private consumption, is “likely to remain subdued through 2026, weighed down by elevated consumer prices, weaker household balance sheets, and moderating remittance inflows.”

If realized, Goldman Sachs’ downgraded growth forecast would fall short of the government’s already downscaled minimum target of 3.5 percent. This would also mark the weakest growth in six years since the 9.5-percent contraction seen at the height of the Covid-19 pandemic in 2020.

Goldman Sachs noted that the Philippines’ second-quarter GDP growth moderated to a level that fell short of even the most modest expectations. It had anticipated a 2.7-percent outturn.

According to Goldman Sachs, the sharp slowdown points to a significant loss of momentum, as quarter-on-quarter growth eased to 0.6 percent in the second quarter from 0.9 percent in the first quarter. “Momentum remained sluggish relative to its historical average,” the report said.

A sharp reversal in the investment sector acted as a primary drag on the economy. Investments contracted 4.1 percent quarter-on-quarter in the second quarter, reversing a 2.7-percent expansion in the first quarter, mainly due to weakness in the construction sector.

Domestically, public consumption growth also slid to 1.6 percent quarter-on-quarter from 6.5 percent in the preceding quarter, signaling softer fiscal activity.

While private consumption—the traditional engine of the Philippine economy—showed a marginal uptick to 0.8 percent quarter-on-quarter from 0.6 percent, it remained under pressure from rising costs.

External factors and a slowdown in government spending further weighed on growth. “The Philippines’ growth momentum slowed further as the spillovers of higher global energy prices weighed on growth,” Goldman Sachs said.

Goldman Sachs does not anticipate a rapid recovery for the remainder of the year. The weakening of remittance inflows is of particular concern, as these funds are critical for supporting household spending.

Cash remittances from Filipinos abroad fell to $2.71 billion in May, their lowest level since the $2.66 billion recorded in May last year, signaling a loss of momentum amid risks to overseas Filipino worker (OFW) deployment from the lingering Middle East conflict.

Meanwhile, headline inflation remained above the four-percent target ceiling in July despite easing to a three-month low of 6.2 percent. The Bangko Sentral ng Pilipinas (BSP) raised its inflation assumptions for this year and next to 6.4 percent and 4.5 percent, respectively.

Inflation averaged five percent as of end-July, above the government’s two- to four-percent target range of annual price increases deemed manageable and conducive to economic growth.