# Philippines economic slowdown and monetary policy response

> Live situation record from CLSTR: https://clstr.news/situations/philippines-economic-slowdown-and-monetary-policy-response
> Updated: 2026-08-26T20:13:30.000Z. Sources: 12. Developments: 3.

The Philippine economy grew by 2.3% in the second quarter of 2026, marking its weakest quarterly expansion in 16 years, excluding the pandemic period. This slowdown was driven by a 14.8% contraction in construction and softer household spending, though the agricultural sector rebounded with 2.9% growth. Economic Planning Secretary Arsenio Balisacan attributed part of the slump to a corruption scandal involving flood-control projects.

Despite the slowdown, the Bangko Sentral ng Pilipinas (BSP) raised its key policy rate by 25 basis points to 5 percent in August. Governor Eli Remolona Jr. noted that while headline inflation eased to 6.2% in July, core inflation remains above the tolerance range, citing volatile oil prices and potential El Niño impacts as risks. This move follows a period of high inflation, which averaged 4.8% in the first half of 2026.

Financial analysts remain divided on future policy. Standard Chartered lowered its 2026 GDP growth forecast to 3.5% and expects the BSP to pause hikes, anticipating rate cuts in 2027 once inflation falls below 4%. Pantheon Macroeconomics also suggested a pause to avoid straining the economy, while Nomura economists maintain the rate-hiking cycle will continue. Market sentiment has weakened, with the Philippine Stock Exchange Index falling below the 6,000 level amid concerns over tightening and lowered growth projections.

## Timeline

### 2026-08-26: Philippines economy grows 2.3% amid interest rate hikes and inflation concerns

The Philippine economy grew 2.3% in Q2 2026, but the BSP raised interest rates to 5% to combat inflation, causing the PSEi to drop below 6,000 as consumer concerns over rising costs persist.

6 sources. https://clstr.news/cluster/philippines-economy-faces-growth-slowdown-and-rising-cost-concerns

### 2026-08-08: Bangko Sentral ng Pilipinas policy outlook shifts amid weak GDP growth

Economic analysts suggest the Bangko Sentral ng Pilipinas may pause interest rate hikes following weak 2.3% Q2 GDP growth and moderating inflation.

3 sources. https://clstr.news/cluster/bangko-sentral-ng-pilipinas-policy-outlook-shifts-amid-weak-gdp-growth

### 2026-08-06: Philippines Q2 2026 economy slows to 2.3% as agriculture rebounds

Philippines' Q2 2026 GDP grew 2.3% amid construction decline and 5% inflation, while agricultural output rose 2.9% to P452 bn, led by rice, livestock, poultry and fisheries.

5 sources. https://clstr.news/cluster/philippines-q2-2026-economy-slows-to-23-as-agriculture-rebounds

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Cite as: Philippines economic slowdown and monetary policy response. CLSTR, https://clstr.news/situations/philippines-economic-slowdown-and-monetary-policy-response