The Philippine economy faced headwinds in the first quarter, with growth likely slowing as the nation grappled with the lingering effects of a major scandal and the escalating costs of an ongoing oil crisis. Analysts suggest a muted expansion, a stark contrast to previous periods of stronger economic activity.
Recent assessments indicate a potential GDP growth of just 2.9% between January and March. This represents a deceleration from the 3% growth seen in the final quarter of the previous year and a significant drop from the 5.4% recorded during the same period last year. A key factor driving this slowdown is a sharp decline in construction activity, directly linked to a recent corruption controversy.
The previous year, 2025, saw the Philippine economy grow by a modest 4.4%, the lowest post-pandemic figure. The flood control scandal significantly hampered government spending, eroded consumer confidence, and dampened overall business sentiment, creating a challenging economic landscape.
Beyond the scandal, rising costs are also weighing heavily on the economy. Private sector spending is expected to remain subdued, particularly household consumption, as consumers grapple with weak economic sentiment and the increasing price of essential goods. These pressures are creating a cautious environment for spending and investment.
While some forecasts are slightly more optimistic, predicting a 3.3% growth for the quarter, these projections acknowledge the impact of a high base effect. Last year saw a substantial increase in government spending ahead of elections, making comparisons difficult and potentially masking underlying economic weaknesses.
Economist surveys reveal a consensus estimate of 3.4% GDP growth for the first quarter, falling short of the government’s ambitious 5%-6% target for the year. The official figures, due to be released soon, will provide a clearer picture of the nation’s economic performance.
Adding to the economic concerns, inflation is accelerating. Prolonged increases in global oil prices, fueled by geopolitical uncertainties, are pushing up the cost of living across the Philippines. April’s inflation rate is predicted to be the fastest in three years, potentially reaching as high as 6.2%.
Fluctuations in global oil markets, particularly those impacted by the ongoing conflict in the Middle East, have kept domestic fuel prices elevated. While some fuel retailers recently implemented price rollbacks, the overall trend points towards continued inflationary pressure.
The impact of rising energy costs is not limited to fuel. Analysts anticipate broader spillover effects, driving up core inflation – the measure of inflation excluding volatile food and energy prices – to 3.7% in April. This suggests that inflationary pressures are becoming more widespread throughout the economy.
The central bank has already expressed concern about the emergence of second-round price effects, where initial increases in energy prices lead to higher costs for other goods and services. This is particularly evident in sectors like fertilizer, transportation, and food, impacting both businesses and consumers.
Different forecasts place April’s inflation rate between 5.5% and 6.2%, consistently exceeding the central bank’s target range of 2-4%. The upcoming release of inflation data will be closely watched for indications of the severity and persistence of these inflationary pressures.
