Philippine Economy Misses Q1 Growth Forecasts as Middle East Crisis, Budget Delays Bite
MANILA — The Philippine economy grew 2.8% in the first quarter from a year earlier, the statistics agency reported Thursday, falling short of market expectations and underscoring the toll that geopolitical tensions and domestic policy delays are taking on Southeast Asia’s fastest-growing economy.
The figure came in well below the 3.5% median forecast in a Reuters poll of economists. On a seasonally adjusted basis, gross domestic product rose just 0.9% quarter-on-quarter, compared with the 1.5% expansion analysts had predicted.
Economic Planning Secretary Arsenio Balisacan told a press conference that the slowdown reflected “significant domestic and global challenges,” including the delayed passage and release of the 2025 national budget, and the ripple effects of rising global oil prices triggered by the ongoing crisis in the Middle East.
“The lingering effects of oil prices and their impact on supply chains will persist in the coming months. There are continuing challenges ahead,” Balisacan said.
The government is now recalibrating its growth targets downward, Balisacan added, as global uncertainty clouds the outlook. He said the administration would push to regain momentum by accelerating infrastructure spending and other priority projects in the second half of the year.
The data comes as inflation pressures intensify. Annual consumer price inflation accelerated to 7.2% in April, the highest in three years, breaching the central bank’s forecast range of 5.6% to 6.4%. The surge was driven largely by a spike in fuel costs linked to the Middle East conflict, raising the prospect of further monetary tightening.
“This is a wake-up call,” said Maria Concepcion Reyes, an economist at the University of the Philippines. “The budget mess and external shocks are hitting us at the worst possible time. The government needs to stop pointing fingers and start spending—fast.”
In contrast, trade consultant Ricardo Dizon struck a more measured tone. “The fundamentals are still there—remittances are strong, services are recovering. But we can’t afford another quarter like this. The budget delay was entirely self-inflicted, and that’s the part that hurts most.”
Small business owner Elena Santos, who runs a food stall in Quezon City, said she’s already feeling the pinch. “Every week, my supplier raises prices. Customers are buying less. I’m not sure how much longer I can hold on if this keeps up.”
Analysts warn that unless the government moves quickly to resolve the budget impasse and cushion the impact of fuel price hikes, the Philippines risks losing the growth momentum it had worked so hard to regain after the pandemic.