Philippine 2026 GDP Growth Forecast Lowered to 3.08%
Political tensions and the Middle East conflict contribute to a lowered 2026 GDP forecast, a DLSU report notes.
Recent political developments in the Philippines and the ongoing Middle East crisis are hindering Philippine economic growth, according to researchers from De La Salle University.
In the university’s June 2026 monthly report of the Philippine economy, the researchers forecast that the national gross domestic product (GDP) to grow by 3.08% this 2026.
This represents a downward tick from the 3.11% figure the university reported in May 2026.
“While the difference is small, indicators suggest that the recent global and domestic shocks may be affecting the economy more persistently than previously thought,” the researcher wrote.
GDP Growth is Projected to Slow Through the Third Quarter of 2026
The researchers also forecast the Philippine GDP to grow by 2.50% in the second quarter of 2026, a small slip from the 2.8% growth during the first quarter this year.
They also expect GDP growth to slow to 2.20% in the third quarter, which they believe will mark the lowest point of the projected downward trend.
The decreased growth later this year can be attributed to the ongoing energy shock created by the United States-Iran conflict, the recent interest rate hikes by the Bangko Sentral ng Pilipinas (BSP), and the described “impending food crisis” caused by the rise in fertilizer prices and the upcoming El Niño.
The researchers also acknowledged that as they published their report on June 15, 2026, the United States and Iran reached a ceasefire agreement, which is expected to be signed on Friday, June 19.
Although medium-term growth is expected to rise in 2027 and 2028, the researchers say they do not see faster growth under the current domestic and international conditions.
“Unless the US/Israel-Iran war ends soon (the two parties just agreed to end it) and the world economy recovers fast, and the domestic mood turns around, this state of affairs will remain until the end of this Administration,” they wrote.
Philippine GDP Growth in 2026 by Economic Sector
The June report also detailed underwhelming projections for private consumption (total money spent by households and individuals on final goods and services), investment, government expenditure, and net exports (total exports subtracted by imports).
The four factors sum up a country’s GDP.
Private Consumption Growth Slows Amid Rising Inflation
The DLSU researchers forecast private consumption to grow 2.82% in 2026, the weakest annual figure in the post-pandemic era. Private consumption in the second and third quarters of the year is projected to stand at 2.50% and 2.20%, respectively.
For the fourth quarter, projections for private consumption will rise to 3.50%
The mid-year slowdown in consumption is attributed to the recent rise in inflation in the Philippines, caused by the ongoing Middle East conflict.
The Philippine Statistics Authority (PSA) recorded a 7.2% inflation rate for April 2026, a jump from March’s 4.1%. Inflation edged down to 6.8% in May 2026.
The BSP set its target inflation rate for 2025-2028 at 3.0%.
2026 is seen by the researchers to be the beginning of an uptick, with consumption growing to 4.03% in 2027 and 4.60% in 2028. Increased government spending by the national administration to improve its position for the 2028 elections will contribute to the projected rise.
Government Spending Accelerates Ahead of the 2028 Elections
Government spending is expected to accelerate throughout 2026, with a yearly overall growth of 5.26%, the researchers shared. They explain that the high growth is “driven by higher disbursement to local government units, payments for foreign-assisted railway projects, and the return of P60 billion in excess funds to PhilHealth.”
“The national government should increase spending to catch up and drive short-term economic growth,” the researchers opined.
With government spending growth in the first quarter recorded at 3.51%, the report forecasts the figure to rise to 5.00% in the second quarter, 5.50% in the third quarter, and 7.00% in the fourth quarter.
Government spending will increase to double digits in the following two years, explained by expected pre-election spending. The figure will stand at 10.5% in 2027 and 11.0% in 2028, the report forecasted.
Gross Fixed Capital Contracts for the First Time Since the Pandemic
Gross fixed capital, the value of the acquisition of new or existing assets in an economy, remains negative for 2026. The DLSU economic reports -1.78% growth in gross fixed capital for 2026, which would be the first yearly contraction since the pandemic.
The contraction will continue for two years, with −1.82% in 2027 and −2.00% in 2028, the researchers predict.
The report cites weak private sector investment and slow government funding disbursement due to the flood control corruption issue.
Export Growth Holds Steady While Import Growth Weakens
Growth in exports from the Philippines is forecasted at 4.81% for 2026, with the electronics industry lifting the increase.
In the first quarter of 2026, exports grew by 9.74%. The growth is predicted to slip to 3.00% in the second quarter, 2.50% in the third quarter, 4.00% in the fourth quarter. The economic fallout caused by the US-Iran conflict, particularly the trade disruption from the closure of the Strait of Hormuz, increased exportation costs and may lessen the actual volume of exports.
Electronic exports contributed to $4.24 billion of Philippine exports in 2025, 57% of the total USD 7.34 billion, according to the Semiconductor Electronics Industry Foundation, Inc., a Philippine-based organization of local and domestic electronics companies.
The dominance of electronic exports can be attributed to the growing global need for semiconductor computer chips, a key component in the development of artificial intelligence.
Export growth is projected at 5.83% in 2027 and 6.88% in 2028.
Meanwhile, growth in imports to the Philippines is projected at 1.78% in 2026. From a recorded 6.1% increase in the first quarter of the year, import growth is forecasted to drop to 1.35% in the second quarter, 0.76% in the third quarter, and 1.53% in the fourth quarter.
The recent strength of the dollar has made the cost of importation more expensive, weakening the growth of imports to the country.
The recovery of consumer demand and the normalization of oil import prices may lead to stronger figures for importation, according to the researchers. The number will rise to 5.69% in 2027 and 7.09% in 2028.
Frequently Asked Questions
De La Salle University’s June 2026 economic report projects Philippine GDP growth at 3.08% for the full year — a slight downward revision from the 3.11% forecast issued in May 2026. The revision reflects the cumulative effect of global and domestic economic shocks.
DLSU researchers attribute Q3 2026’s projected 2.20% GDP growth — the lowest point of the year — to the energy shock from the US-Iran conflict, recent Bangko Sentral ng Pilipinas interest rate hikes, rising fertilizer prices, and the anticipation of El Niño weather conditions.
The US-Iran conflict has driven an energy price shock that elevated Philippine inflation to 7.2% in April 2026, disrupted export logistics through the Strait of Hormuz, and reduced private consumption growth — contributing to DLSU’s downward revision of the 2026 GDP growth forecast.
DLSU projects Philippine gross fixed capital formation to contract by −1.78% in 2026 — the first annual decline since the pandemic — and forecasts continued contraction through 2027 and 2028, citing weak private sector investment and delayed government disbursements tied to the flood control corruption issue.
DLSU attributes accelerating government expenditure — projected at 5.26% growth in 2026, rising to 10.5% in 2027 and 11.0% in 2028 — to higher local government unit disbursements, foreign-assisted railway project payments, the PhilHealth fund return, and anticipated pre-election spending ahead of the 2028 national elections.
