Philippines economy grows 2.3% amid interest rate hikes and inflation concerns

The Philippine economy grew by 2.3% in the second quarter of 2026, according to the Philippine Statistics Authority. While this represents a slowdown from previous quarters, the nation was recently reclassified by the World Bank as an upper-middle-income economy.

Despite this growth, financial concerns remain high. A report by FWD Life Insurance Philippines indicates that 74% of middle-income Filipinos are concerned about rising everyday expenses, driven by inflation which averaged 4.8% in the first half of 2026.

In response to persistent inflation risks, the Bangko Sentral ng Pilipinas (BSP) raised its key policy rate by 25 basis points to 5 percent. Governor Eli Remolona Jr. noted that while headline inflation eased to 6.2% in July, core inflation remains above the tolerance range. The central bank cited volatile oil prices and potential El Niño impacts on food prices as ongoing risks.

Market sentiment has been negatively impacted by these developments. The Philippine Stock Exchange Index (PSEi) fell 0.80 percent to close below the 6,000 level, marking its lowest close in over two months. Investors expressed concerns regarding further monetary tightening and lowered economic growth projections.