The Philippine economy entered the second half of 2026 facing slower growth, stronger inflationary pressures, and heightened external risks, even after the country officially reached upper-middle-income status, the Department of Economy, Planning, and Development (DEPDev) said.
DEPDev Secretary Arsenio Balisacan said the economy continued to absorb the delayed impact of domestic and global developments from the latter part of 2025, which weighed on both business and consumer confidence.
“These developments affected business and consumer confidence and coincided with a marked slowdown in public infrastructure spending, weakening one of the economy’s important drivers of growth,” Balisacan said.
He said conditions became more difficult as tensions in the Middle East drove global oil prices higher, adding pressure on the Philippines as an energy-importing economy.
“The escalation of conflict in the Middle East led to a sharp increase in global oil prices. For the Philippines, a net importer of energy, this translated into higher transport and production costs and stronger inflationary pressures,” Balisacan said.
“The episode also reminded us that, despite the progress we have achieved, our economy remains vulnerable to external shocks beyond our control,” he added.
Despite the difficult economic environment, Balisacan said the Philippines marked a major development milestone after the World Bank classified the country as an upper-middle-income economy, ending 39 years under the lower-middle-income category.
He said the Philippine economy grew by an average of 5.8 percent annually from 2021 to 2025, outpacing the average growth of upper-middle-income economies and neighboring countries in Southeast Asia.
“In 2025, our gross national income per capita reached $4,850, surpassing the World Bank’s threshold for upper-middle-income countries,” Balisacan said.
“This is an achievement we can all take pride in. At the same time, we should be clear about what this milestone means—and what it does not. Upper-middle-income status is not our destination. It marks another stage in our development journey,” he added.
To sustain growth and address current risks, Balisacan said the government will focus on four priorities in the second half of the year.
These include restoring confidence and accelerating growth by fast-tracking strategic infrastructure and other high-impact public projects, while encouraging greater private sector investment.
The government will also work to shield Filipino households from inflation and external shocks by preserving price stability, strengthening food and energy security, and improving climate resilience through investments in water resources, irrigation, flood control, and disaster preparedness.
Balisacan said the government will continue investing in education, healthcare, digital transformation, innovation, and workforce development to improve long-term productivity and competitiveness.
He added that strengthening institutions will remain a key priority through transparent governance, sound public financial management, efficient regulation, and a more predictable business environment.
“These priorities reinforce one another,” Balisacan said, noting that the measures are aimed at building an economy that can grow faster, withstand shocks, and create more opportunities for Filipinos.