By Justine Irish D. Tabile, Senior Reporter

THE PHILIPPINE ECONOMY is projected to fall short of the government’s 3.5%-4.5% growth target this year, with the University of Asia and the Pacific (UA&P) expecting a 3% gross domestic product (GDP) growth.

Victor A. Abola, a senior economist at the UA&P, said Philippine GDP could grow by 3% this year before accelerating to 5.4% next year on a recovery in infrastructure spending.

“The growth rate will be quite slow, at 3%. I expect next week that we will see the third-quarter GDP, [at] around 2% again. But the fourth quarter will be different, really closer to 4%,” Mr. Abola said at an economic briefing on Wednesday.

“I do not think (we) will reach 3.5% because the first three quarters are going to pull it down,” he added.

If realized, the forecasts would put Philippine growth below the government’s target this year but within its 5%-6% target next year.

In the first semester, the Philippine economy grew by 2.6%, amid 2.9% growth in household final consumption expenditure and a 6.5% contraction in gross capital formation.

Third-quarter GDP data will be released on Nov. 9.

Mr. Abola said fourth-quarter growth will be driven by infrastructure spending, noting that the government still has around 40% of its infrastructure budget to spend after weak disbursements in the first three quarters.

“Probably they will not spend all of it… but a good part of that will be spent. So even if you have that, that is still considerable because of the employment,” he said.

“Together with that, there will also be very strong private [residential] construction,” he added.

Infrastructure and other capital outlays in the first eight months totaled P522 billion, down 34.6% from P798.4 billion in the same period a year ago. This was equivalent to just 56.04% of the P931.54 billion programmed for infrastructure and other capital outlays for the full year.

Mr. Abola said his growth outlook already factors in El Niño, which he estimates could shave 0.4-0.6 percentage point (ppt) off GDP growth.

“Its impact will be on agriculture,” he said, citing the 6% contraction in agriculture during the 1998 El Niño episode.

Mr. Abola said agricultural output could decline by 2-4% in 2027. With the sector accounting for around 10% of GDP, a 4% contraction would directly reduce growth by around 0.4 ppt, with other effects bringing the total drag to 0.6 ppt.

A strong El Niño is active in the Tropical Pacific and is expected to intensify to a very strong event through December before persisting in the first half of 2027, according to the state weather bureau.

Mr. Abola also expects inflation to average 6.2% this year, before easing to 5.4% next year.

THIRD-QUARTER OUTLOOK
Meanwhile, Philippine National Bank (PNB) and Bank of the Philippine Islands (BPI) both expect GDP growth of 3.2% in the third quarter.

PNB Economist Alvin Joseph A. Arogo said growth would be driven mainly by “some normalization in transport spending following the initial petroleum price shock in the second quarter, as well as a favorable base effect on public construction.”

BPI Lead Economist Emilio S. Neri, Jr. said third-quarter growth likely picked up from 2.3% in the second quarter, ending four consecutive quarters of slowing growth.

“Still, the recovery appears shallow and uneven, with external demand and government spending doing most of the work while private domestic demand stays cautious,” he said in a commentary.

Mr. Neri cited sustained demand for electronics linked to artificial intelligence-related exports, while a pickup in National Government disbursements reflects catch-up spending efforts.

Favorable base effects also likely supported growth, as the drag from last year’s public infrastructure issue first emerged in the third quarter of 2025.

However, Mr. Neri said private construction indicators weakened further in the third quarter, as public infrastructure spending continued to contract, although at a much slower pace.

“Outside construction, however, other private investments showed signs of recovery, particularly in energy, suggesting firms are selectively resuming capital spending,” he said.

“Meanwhile, conventional vehicle sales and consumer goods imports suggest households remain selective, with discretionary purchases still under strain,” he added.

Mr. Neri said southwest monsoon rains and flooding may have also limited the recovery by disrupting farm output, construction, logistics and retail activity.

For the fourth quarter, BPI expects growth to continue recovering gradually, supported by favorable base effects, government catch-up spending and resilient electronics exports.

“Holiday spending may give consumption a seasonal lift, though household demand is unlikely to rebound strongly while purchasing power remains stretched,” Mr. Neri said.

“The key risks are a slower-than-expected recovery in infrastructure disbursement, persistently weak public and private construction, and lingering weather-related damage to agriculture,” he added.