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(Bloomberg) — Philippine economic growth dramatically slowed in the second quarter, defying expectations of a pickup, as the protracted Middle East conflict stokes inflation and drags down consumer spending and investment.
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Gross domestic product expanded just 2.3% in the April-to-June period from a year earlier, the nation’s statistics agency said Friday. That was well below the median estimate of 2.9% in a Bloomberg News survey and the 2.8% print for the previous quarter.
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The growth was the slowest since the fourth quarter of 2009, outside of the pandemic.
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The Philippines, which imports nearly all its oil from the Middle East, has been one of the hardest hit by supply disruptions from the Iran war. Higher energy costs and a weakening currency have pushed up food and fuel prices and dented household incomes. Companies have also cut back on capital spending, wary of the uncertainty.
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At the same time, state spending is tepid due to a graft scandal involving billions of pesos in flood infrastructure projects, while politics is being dominated by the lengthy impeachment trial of Vice President Sara Duterte. In June, the government slashed its 2026 GDP growth target to 3.5%-4.5%, from 5%-6%.
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That malaise has prompted President Ferdinand Marcos Jr. to pledge billions of pesos of cash aid and fuel subsidies to vulnerable sectors, and pledge tax relief for workers and small businesses. The Bangko Sentral ng Pilipinas has also jacked up policy rates by 50 basis points this year and signaled it is prepared to raise further to guide inflation back to the target.
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