IMPROVED government spending will not be enough to lift Philippine economic growth this year, a former Bangko Sentral ng Pilipinas (BSP) official said, with the lowered 3.5- to 4.5-percent 2026 target in danger of being missed.
“The first-half numbers make the government’s revised full-year target increasingly difficult to achieve,” GlobalSource Partners economist and former central bank Deputy Governor Diwa Guinigundo said in a commentary on Wednesday.
“The Philippine economy does not merely need more spending in the second half of the year. It needs a stronger foundation for private investment and productivity,” he added.
Growth was a slower-than-expected 2.3 percent in the second quarter, lower than the 2.8 percent recorded three months earlier. With the first-half average at 2.6 percent, hitting the lower end of the 2026 goal will require a marked second-semester improvement to 4.4 percent.
The government in June slashed this year’s gross domestic product (GDP) growth from 5.0-6.0 percent given the lingering effects of a massive corruption scandal and the impact of the war in the Middle East. A miss, if realized, will be the fourth straight year that official targets have not been achieved.
‘Both disappointing and expected’
“There is no contradiction in describing the second-quarter GDP result as both disappointing and expected,” Guinigundo said.
“It is disappointing because a 2.3-percent growth rate is far below what the Philippines needs to create enough jobs, reduce poverty and raise incomes in a rapidly growing population,” he added.
The economy has been slowing since last year’s flood control project scandal, which weighed heavily on government spending and investments. While the government has responded by promising catch-up plans, faster infrastructure implementation and closer monitoring of agency performance, Guinigundo said “a catch-up plan is never an economic strategy.”
“The first priority should be to restore confidence in the investment environment,” he added.
The economy slowed mainly due to a contraction in gross capital formation — a measure of investments — of 9.2 percent, worsening from the previous quarter’s 3.1-percent drop.
Longstanding problems involving “regulatory uncertainty, slow permitting, infrastructure gaps, high logistics costs and delays in the judicial system,” Guinigundo said, will not be “solved by simply increasing public expenditure for a few quarters.”
“What the latest GDP numbers are telling us is more fundamental,” he continued.
“The Philippines is suffering from a weakening of the very domestic drivers that had supported its relatively strong growth performance in the past namely, consumption, investment and public infrastructure.”
Guinigundo called for a clearer industrial policy that would encourage investment in manufacturing, technology, higher-value services and digital industries.
The Philippines, he said, cannot rely indefinitely on household consumption, remittances, business process outsourcing and traditional services to generate the growth needed to raise living standards.
“The Philippine economy does not need another list of short-term measures or off-the-cuff explanations for why growth disappointed,” Guinigundo said.
“It needs an economic strategy that connects governance reform, infrastructure, education, energy security, industrial policy, investment promotion and regulatory reform.”
