The Philippine economy expanded at a slower pace of 2.8 percent in the first quarter of 2026 from 3.0 percent in the last quarter of 2025, weighed down by weak investment activity and contractions in the agriculture and industry sectors, the Philippine Statistics Authority (PSA) said Thursday, May 7, 2026.
Data from the PSA showed that the services sector remained the main engine of growth, expanding by 4.5 percent during the January-to-March period. In contrast, agriculture, forestry and fishing contracted by 0.2 percent, while industry slipped by 0.1 percent.
Among industries, wholesale and retail trade, repair of motor vehicles and motorcycles emerged as the top contributor to growth, posting a 4.6 percent expansion. Financial and insurance activities also provided support with 3.4 percent growth, while public administration and defense, compulsory social security accelerated by 8.6 percent.
On the demand side, household final consumption expenditure, a traditional pillar of the Philippine economy, grew by 3.0 percent year-on-year, indicating that consumer spending remained positive but subdued. Government spending also supported economic activity, rising by 4.8 percent in the first quarter. Meanwhile, exports of goods and services increased by 7.8 percent, outpacing the 6.1 percent growth in imports.
However, investment activity weakened significantly, with gross capital formation declining by 3.3 percent during the period. The PSA also reported that Gross National Income (GNI) grew by 3.0 percent in the first quarter, slightly higher than GDP growth. Net Primary Income from the Rest of the World, which includes income from overseas Filipino workers and investments abroad, increased by 4.5 percent.
The latest gross domestic product (GDP) figure marked a sharp moderation from previous growth performances, signaling softer domestic economic activity amid persistent global and local headwinds.
In a press conference, PSA chief and National Statistician Claire Dennis Mapa said the 2.8 percent growth rate in the first quarter of 2026 is the slowest since the 3.8 percent in the first quarter of 2021, amid the impact of the Covid-19 pandemic.
Department of Economy, Planning and Development (DEPDev) Secretary Arsenio Balisacan noted that the country's growth performance trails that of Vietnam, Indonesia and China, among others, in the region. Balisacan attributed the slower growth to lingering effects of the flood control corruption controversy, which weighed on consumer sentiment and business and investment confidence; delays in the passage and subsequent release of the 2026 national budget that slowed the rollout of critical government programs and infrastructure projects, particularly in public construction; and the conflict in the Middle East, which escalated toward the end of February, triggering higher global oil prices and renewed supply chain pressures, creating additional risks for oil-importing economies such as the Philippines.
“These challenges are real, and the Marcos Administration is confronting them directly and decisively,” said Balisacan. “Restoring public trust and strengthening institutional credibility remain among the Marcos Administration’s highest priorities. Addressing corruption firmly and transparently is essential to rebuilding confidence among businesses, investors, and consumers alike,” he added.
Balisacan said the President has also directed implementing agencies to accelerate the execution of high-impact infrastructure projects in the coming months, noting that catch-up plans must be guided by clear milestones, sound risk management, and strong accountability mechanisms. “We are confident that the current leadership of the infrastructure-related agencies, especially the Department of Public Works and Highways and the Department of Transportation, will move critical infrastructure projects forward with greater urgency and discipline for the remainder of the year,” he said. “Even as we accelerate implementation, we remain committed to fiscal prudence. We will enforce stricter validation standards and more rigorous monitoring systems to ensure that public resources are used efficiently, responsibly, and transparently,” he added.
Balisacan said the government is also preparing for the possible effects of the developing El Niño phenomenon, which may emerge in the coming months and persist into early 2027, focusing on sound water and irrigation management to ensure the reliability of critical infrastructure, and strengthening climate risk mapping and weather forecasting to support timely and science-based interventions.
He said the administration is also continuously positioning the country as a competitive manufacturing hub for AI-enabled electronics, semiconductors, and electric vehicles. He said the country's semiconductor and electronics exports are expected to remain resilient, supported by sustained global demand and continuing tariff exemptions. “We also welcome strategic investments in advanced materials, electric vehicle manufacturing, and high-value industries that will deepen technology transfer and strengthen our industrial ecosystem,” said Balisacan. “To sustain growth and resilience, we call on all sectors -- government, business, labor, and civil society -- to work together as partners in navigating today’s challenges and building tomorrow’s opportunities,” he added.
