‘Philippines economy likely grew 2.6% in Q2’

“Sticky domestic inflation, a still-wide trade deficit and more hawkish Fed are expected to sustain demand for the dollar and maintain interest rate differentials in favor of US assets.”

MANILA, Philippines — The Philippine economy likely grew at a slower pace in the second quarter due to the impact of high inflation and recent headwinds, including the Middle East conflict, on economic activity, according to the University of Asia and the Pacific (UA&P).

“We estimate the second quarter GDP (gross domestic product) growth at 2.6 percent, with consumption and investment likely weighed down by recent headwinds,” UA&P said in the June 2026 edition of The Market Call Capital Markets Research report.

The forecast is slower than the 2.8-percent growth posted in the first quarter.

First quarter’s growth outturn was the weakest since 2021 as last year’s flood control controversy and the oil shock triggered by the war in the Middle East earlier this year dampened domestic demand and investor sentiment.

The Philippine Statistics Authority is set to release second quarter GDP data on Aug. 7.

UA&P said that it expects inflation to stay above target for the rest of the year and continue to impact private consumption and investment.

While inflation eased in May, it remained elevated at 6.8 percent from 7.2 percent in April.

Average inflation from January to May stood at 4.5 percent, above the Bangko Sentral ng Pilipinas’ two to four percent target band.

UA&P said that elevated inflation is also expected to keep the BSP on a tightening path.

“Our outlook pencils in 50 more basis points of rate hikes for this year, bringing the policy rate to 5.25 percent,” UA&P said.

At its June 18 meeting, the central bank raised the benchmark interest rate by 25 basis points to 4.75 percent.

As for the peso, which remained under pressure in May, UA&P said that it expects a bias toward the 61 to $ level in the near term.

“Sticky domestic inflation, a still-wide trade deficit and more hawkish Fed are expected to sustain demand for the dollar and maintain interest rate differentials in favor of US assets,” UA&P said.

“Further peso depreciation could be tempered if global oil prices continue to soften, easing pressure on the country’s import bill and inflation expectations,” it said.