ADB Maintains 3.8% PHL GDP Growth Forecast for Year, Cites Need for Strong Second Half

MANILA, Philippines — The Philippine economy may still post 3.8 percent growth this year, but achieving this target hinges on a strong second half recovery in project execution and household consumption, according to Asian Development Bank (ADB) President Masato Kanda. “It is challenging, but we think reaching the 3.8 percent forecast for 2026 is possible, attainable. But it hinges on a strong second half recovery in project execution and household consumption,” Kanda said during a media lunch yesterday. If the ADB’s growth forecast is realized, the country’s economic growth would fall within the government’s revised 3.5 to 4.5 percent growth target for the year. The country’s economic growth slowed to 2.3 percent in the second quarter, the weakest since 2021. This brought average growth in the first semester to 2.6 percent. Kanda said the second quarter growth outturn was due largely to the delays in public spending as the government tightened project oversight following the flood control controversy last year. “The primary challenge facing infrastructure is increasingly related to execution rather than financing,” he said. While project oversight is important, he said that it is also critical to work on project delivery. To help in this area, the ADB is working with the Department of Public Works and Highways and Department of Transportation on procurement and management. Apart from slower infrastructure spending, Kanda said that the second quarter growth performance was also driven by muted consumption as inflation remained elevated. Household spending posted 2.8 percent growth in the second quarter, slower than the previous quarter’s three percent growth and the 5.2 percent growth in the second quarter last year. Inflation eased to 6.1 percent in August from the previous month’s 6.2 percent. This brought average inflation in the January to August period to 5.2 percent, exceeding the government’s two to four percent target. For the ADB, a significant acceleration in public investment execution and easing inflation would allow the economy to post higher growth. Kanda said that private investment would also be an important factor in driving economic growth. While there is ample liquidity, he said that the investing environment needs to be improved.