PHILIPPINE economic growth could have slowed to 2.5 percent in the second quarter, the University of Asia and the Pacific (UA&P) said, as persistent inflation and higher interest rates weighed on domestic activity.
“With these headwinds and still-soft macro data releases, we lower our second-quarter GDP growth estimate to 2.5 percent,” UA&P economists said in the July edition of the school’s Market Call report.
The UA&P previously forecast second-quarter growth of 2.6 percent, slower than the 2.8 percent seen in the first three months of 2026 and below the government’s downwardly revised 3.5- to 4.5-percent target for the year.
Preliminary April-June growth results are scheduled to be released by the Philippine Statistics Authority by Friday next week.
The UA&P economists said the revision to their second-quarter forecast reflected a combination of renewed hostilities in the Middle East, Metro Manila’s P85 daily minimum wage increase and the effects of a severe El Niño, which together could push inflation back above 7.0 percent in the third quarter.
“While easing food and fuel prices should continue to moderate headline inflation, persistent core inflation suggests underlying price pressures remain entrenched,” they said.
While recent indicators may have shown that “some soft recovery is underway,” they said “persistent above-target inflation and subdued business optimism may undermine the recovery narrative.”
Inflation has eased in the last two months but remains above the Bangko Sentral ng Pilipinas’ (BSP) 2.0- to 4.0-percent target while core inflation, which strips out volatile food and energy prices, accelerated to 4.4 percent.
The UA&P economists warned that inflationary pressures were likely to keep the BSP on a tightening path, with another 50 basis points of policy rate increases expected this year.
“The BSP is likely to maintain a cautious policy stance as broadening price pressures, second-round effects, and the sudden upward minimum wage adjustment continue to pose upside risks,” they said.
