HSBC warns GDP growth slowed to 2.8% in Q1 2026 while inflation surged to 6.8%, the highest in ASEAN.
The Philippines is at risk of stagflation as GDP growth decelerated to 2.8% year-on-year in the first quarter of 2026, the slowest pace since 2009 excluding the pandemic. Weak public spending and cautious consumer behavior have dampened demand, while the labor market softens with unemployment rising above 5%.
Inflation accelerated to 6.8% year-on-year, the highest in the ASEAN region, exacerbating concerns. Prior quarters saw stronger growth, but persistent inflation and subdued fiscal disbursements have weighed on economic activity. Households and businesses are cutting expenditures, further straining recovery prospects.
Analysts suggest a quick market rebound is possible once energy price pressures ease, citing prudent fiscal policies. However, growth is expected to remain below potential through 2027 unless demand revives.