Philippine Economy Poised for Over 4% Growth in Q4 Amid Infrastructure Push

The Philippine economy could recover to over 4 percent growth in the fourth quarter, following a weak first half and a potentially sluggish third quarter, bolstered by a significant ramp-up in infrastructure spending. Economists at the University of Asia and the Pacific (UA&P) project third-quarter growth to remain tepid at around 2.3 percent, but they observe emerging "green shoots" signaling a potential rebound. According to UA&P's latest report, "Short-term pressures from oil volatility and trade deficits may push the peso toward P63/$1, yet a massive infrastructure surge and solid fundamentals will propel economic growth past 4 percent in the fourth quarter." The report further notes that "Historic June milestones, including record employment of 50.7 million, an export surge to $8.8 billion, and peak OFW remittances of $3.4 billion, generate strong momentum. This solid baseline helps the economy absorb the temporary third-quarter slowdown that August floodings and spending delays created." If this forecast materializes, it would align with the Marcos administration's revised growth target of 3.5 percent to 4.5 percent for 2026. The Philippine economy's growth averaged 2.6 percent in the first half of the year, primarily weighed down by the fallout from the Middle East war and a slowdown in government spending. The government is now relying on a catch-up in infrastructure spending in the second half to help revive the economy. A total of P579.74 billion has been earmarked for infrastructure and other capital outlays in the third and fourth quarters. The Department of Budget and Management has indicated that allotments have already been released to the Department of Public Works and Highways (DPWH) to enable project implementation in August and September. Data as of July shows the DPWH had received 99.5 percent of its P530.12-billion budget, a stark contrast to the 40 percent year-on-year decline in infrastructure spending from January to June, which totaled P367.4 billion. Regarding inflation, UA&P economists anticipate one final quarter-point rate hike from the Bangko Sentral ng Pilipinas (BSP) this year, as price pressures cool. This would bring the cumulative increase in policy rates to 100 basis points. Nevertheless, they expect financial markets to remain volatile in the near term due to elevated bond yields in advanced economies pressuring local assets, although Philippine stocks are seen as attractive for long-term investors.