PH Q2 growth seen easing to over 17-yr low

INQUIRER FILE PHOTO

The Philippine economy could have slowed to as low as 1.42 percent in the second quarter, potentially marking its weakest quarterly growth in over 17 years amid the peak of the Middle East war’s energy shock, according to the Congressional Policy and Budget Research Department (CPBRD).

In its latest report, the House of Representatives’ policy think tank said its forecasting models produced second-quarter gross domestic product (GDP) growth estimates ranging from 1.42 percent to 4.07 percent.

Only one model generated a forecast above 4 percent, while most projected growth between 2 percent and 3 percent, resulting in a median estimate of 2.68 percent.

If the lower end of the forecast materializes, it would mark the country’s weakest quarterly expansion since the 1.1 percent growth posted in the first quarter of 2009, excluding the pandemic-induced contractions. It would also fall short of the Marcos administration’s already downgraded 3.5-percent to 4.5-percent growth target for 2026.

“Upon considering the higher-order consequences of the US-Iran Conflict, including but not limited to broad-based demand destruction and notably elevated input costs, the aforementioned forecasts can be revised downwards,” the CPBRD said.

“Since the oil shock from the crisis only began transmitting through domestic prices in March, its fuller impact on inflation and business costs would have weighed more heavily in the second quarter than in the first,” it added, noting that the Philippines is even more vulnerable as a net energy importer.

According to the CPBRD, the resulting energy crisis is expected to further weaken household consumption—one of the country’s largest drivers of economic growth—which already contributed only 2.2 percentage points to first-quarter GDP, its weakest print since the third quarter of 2010 outside the pandemic.

The report said these pressures had compounded the effects of elevated inflation, which has remained above the tolerable 2-percent to 4-percent target range since the war began, eroding the purchasing power of Filipino households.

It estimated that the value of every peso declined by about 20 percent between 2020 and 2025.

The downside scenario would also represent a further deterioration from the 2.8-percent growth recorded in the first quarter, extending the country’s economic slowdown to a fourth straight period since the third quarter of 2025.

As it is, the CPBRD said the downward growth trajectory was now systemic.

“The resulting energy crisis can only be argued to have deepened, not caused, underlying economic patterns,” it said.

“The prevailing pattern is largely attributable to years of declining investor confidence, steadily rising input costs, and accumulated inflationary pressures. These, in turn, have adversely affected the expansion of investments, consumption, and economic activity. To wit, job generation has been, at best, subdued,” it added.