Pantheon cuts PH 2026 growth forecast to 2.8%

MANILA, Philippines — The Philippine economy could be headed for its weakest annual growth in nearly two decades outside the pandemic, with London-based Pantheon Macroeconomics slashing its 2026 forecast to just 2.8 percent after an “abysmal” second-quarter performance.

In a commentary, Pantheon economists Miguel Chanco and Meekita Gupta cut their 2026 growth forecast from 4 percent, while lowering their 2027 projection to 4 percent from 5 percent as the recovery “looks set to be even more lackluster than previously estimated.”

READ: S&P cuts PH growth outlook to 4.1%

Article continues after this advertisement

The downgrade came after the country’s gross domestic product growth slowed further to 2.3 percent in the second quarter from 2.8 percent in the first quarter as the Middle East war peaked and government spending stayed weak.

This latest print, which Pantheon described as “abysmal” and “unsurprising,” placed the country as the weakest-growing economy among major Southeast Asian economies so far.

If Pantheon’s forecast is realized, full-year growth would fall well below the Marcos administration’s downgraded 3.5-percent to 4.5-percent target. It would also mark the weakest annual expansion outside the pandemic years since 2009, when the economy grew by just 1.4 percent.

“Ultimately, overall investment is far more sensitive to changes in borrowing costs than other areas of domestic demand,” Chanco and Gupta, who identified the sharp contraction in investment as a major drag on growth, said.

“Any bounce from the Q2 contraction is likely to be minor, with industry and construction still operating at below-average capacity and, unsurprisingly, surveyed expansion plans remaining depressed amid plummeting business confidence and flat-at-best market sentiment,” they added.

Article continues after this advertisement

READ: DBCC cuts PH 2026 growth target to 3.5-4.5%

Consumption, meanwhile, is expected to remain subdued until at least mid-2027 as households continue rebuilding savings depleted during the pandemic and cost-of-living crisis.

Article continues after this advertisement

”Surveyed saving intentions indicate that such activity was curtailed in Q2 by the fallout from the Iran war,” Pantheon said. INQ