The Philippine economy grew by a meager 2.8% in the first quarter of 2026, remarkably slower than the 5.4% expansion in the same period last year and the weakest quarterly performance in over a decade outside the pandemic-stricken years. The slowdown placed the Philippines among the worst performing countries in the region, and prompted the Development Budget Coordination Committee (DBCC) to lower its full-year growth target to 3.5% to 4.5%.
On the expenditure side, household consumption remained the main source of growth but continued to decelerate. Gross capital formation posted a third consecutive quarter of contraction, signaling persistent weakness in investment growth. Government spending and exports provided partial support to the expenditure equation with appreciable growth rates. On the supply side, services remained as the sole driver of growth, with both the agriculture and industry sectors registering contractions.
The paper argues that the slowdown is largely systemic, rooted in anemic capital formation, eroding investor confidence, rising input costs, and accumulated inflationary pressures – rather than as the result of the recent oil supply shock. More pointedly, the deceleration preceded the Middle East conflict, whose effects on oil and fertilizer prices only began transmitting to domestic prices in March 2026. Reversing the prevailing trend would thus hinge on deploying appropriate responses to ongoing crises and addressing the structural weaknesses of the economy.