Economic Brief - 2026-02

Executive Summary

The Philippine economy grew by 4.4 percent in 2025, the slowest growth in 14 years, with the exception of the 2020 recession during the pandemic. Growth in the past year was dragged down by a combination of domestic political issues and global trade uncertainty. Overall, jobs in the construction industry and the inflow of foreign direct investments have been largely affected.
For 2026, the Philippine economy is projected to recover from the slow growth of last year, but uncertainties presented by the ongoing conflict in the Middle East and potential tariff hikes by the US administration threaten the Philippines’ economic trajectory.
The Philippines’ mining, oil, and gas industry was one of the leading industry performers in February 2026. Throughout the month, high global metal prices drove profit for many mining firms. Meanwhile, the property and real estate sector was among the industries posting losses for the period determined due to weak economic growth and general geopolitical uncertainties in 2025.
The Bangko Sentral ng Pilipinas (BSP) cut benchmark interest rates to 4.25 percent from 4.5 percent in their first Monetary Policy meeting of the year last Thursday, February 19. The decision aims to further support economic recovery and stimulate spending amid a sluggish 2025 growth.
Nonetheless, the ongoing conflict between US/Israel and Iran poses inflationary risks to the Philippine economy, as shipping lines and air travel passing this region have been disrupted. Fuel and oil price hikes are forecasted in the weeks to come, potentially increasing the price of basic goods, transportation, and energy for the month. For February 2026, inflation rate was recorded at 2.4 percent, the third consecutive uptick since November 2025.

Assessment on Philippine Economic Situation

The Philippine economy grew by 4.4 percent in 2025, the slowest growth in 14 years, with the exception of the 2020 recession during the pandemic. This growth rate is below the government’s 5.5 percent to 6.5 percent growth target range for the year. The first-half of 2025 saw a steady growth momentum, but this momentum slowed down beginning the third quarter due to the anti-corruption investigation on infrastructure projects. This issue has adversely affected many facets of the economy, particularly employment in construction jobs.

During the same period, entry of foreign direct investments in the Philippines slowed down due to a decrease in intercompany borrowings in the Philippines. This slowdown has been attributed to decreased investor confidence caused by a combination of ongoing local issues – such as the corruption investigation and typhoon damages- and uncertainty in the global trade climate as a result of the US’ protectionist trade policies.

Nonetheless, consumer spending and exports recorded gains in 2025. Year-on-year comparisons show an increase in household final consumption expenditure (HFCE) from 2024 to 2025, likely bolstered by steady inflation. In addition, the country’s exports grew due to high demand for semiconductors, driven by the rise of artificial intelligence and advanced tech industries.

For 2026, government economic managers are moving towards a recovery, driven by the gradual resumption of public infrastructure projects and some kind of resolution of the corruption investigation. Recent policy actions such as the latest benchmark interest rate cut in February 2026 is expected to support the economy by making borrowing costs cheaper. However, external challenges threaten the Philippines’ economic recovery trajectory, which include fuel price increases amid the conflict in the Middle East and potential tariff hikes by the US administration which adds another layer of uncertainty in the global market.

Assessment on Specific Industries

Top-performing industries

The Philippines’ mining, oil, and gas industry was one of the leading industry performers for this month as high global metal prices drove profit for many mining firms.The US-Philippines memorandum of understanding (MoU) to strengthen local critical minerals processing and the Enhanced Fiscal Regime for Large-Scale Metallic Mining Act also provided an optimistic outlook for the industry.

Investors and mining industry players were initially concerned after the February 14 announcement from the Department of Energy (DOE) rejecting Semirara Mining and Power Corporation’s (SMPC) request to extend its coal mining contract, which expires in July 2027, opting to auction it instead. The decision caused SMPC’s shares to dip, briefly impacting the mining industry outlook for the Philippines as SMPC has a dominant share of domestic coal output. The industry later recovered after the DOE clarified that SMPC could still join the bidding, prompting bargain buying.

Low-performing industries

Meanwhile, the property and real estate sector was among the industries posting losses for the period determined. These losses were largely caused by weak economic growth in 2025 and general geopolitical uncertainty, prompting businesses to build or rent less new office spaces. Vacancy rates for office spaces were recorded at 19.4 percent in 2025. Additionally, the residential market has also been grappling with oversupply, particularly its condominium market, with vacancy rates at 24.7 percent as of 2025.

Key Local and Global Events, Other Relevant News Updates

Local Events

Updates on Corruption Investigation: Government officials are now focused on concrete reforms and resolution of the infrastructure corruption scandal which has significantly dragged down economic growth in 2025. As of February 11, Senate Bill 1835 has been filed in an attempt to reorganize the Department of Public Works and Highways (DPWH), specifically reducing the powers of DPWH district offices. As of latest data available, around 25 individuals have reportedly been taken into custody following their involvement in the public infrastructure corruption scandal, which includes high-profile individuals like Senator Ramon “Bong” Revilla, Cezarah “Sarah” Discaya, and Brice Hernandez. Other key individuals implicated like former Ako-Bicol representative Zaldy Co is allegedly in hiding outside of the Philippines.

Philippine-UAE Free Trade Agreement: In January, during Philippine President Ferdinand Marcos’ visit to the United Arab Emirates (UAE), the two countries signed the Philippines’ first Comprehensive Economic Partnership Agreement (CEPA) with a Gulf state. This is expected to improve the country’s trade relations with the region. Further details of the agreement are yet to be available.

US-Philippines Cooperation on Critical Minerals: The Philippines and the United States (US) signed a memorandum of understanding on Wednesday, February 4 to boost cooperation on critical minerals, marking the country’s gradual shift from exporting raw mineral ore towards domestic processing. The agreement is expected to create high-skilled jobs, strengthen the Philippines’ position in the global high-tech supply chain, attract foreign investments, and improve market competitiveness. Further details regarding its implementation have yet to be made available.

BSP Interest Rate Cut: The Bangko Sentral ng Pilipinas (BSP) cut benchmark interest rates to 4.25 percent from 4.5 percent in their first Monetary Policy meeting of the year last Thursday, February 19. The decision aims to further support economic recovery and stimulate spending amid a sluggish 2025 growth. These key rates guide the general level of interest rates in the market which banks use to price loans. With lower interest rates, businesses benefit from lower borrowing costs which can improve cash flow and open up an increase in investments, among others. Meanwhile, further rate cuts will largely depend on the developments of the US/Israel-Iran conflict, especially its impact on inflation and the value of the Philippine peso.

February 2026 Inflation: The Philippine Statistics Authority recorded inflation rate of 2.4 percent in February 2026, driven by faster increases in the prices of food items and housing.

International Developments

US Tariff Policy: Around 10 to 15 percent tariffs on goods entering the US took effect on February 24. President Donald Trump signed an Executive Order on this policy shortly after the country’s Supreme Court struck down many of his previously implemented tariffs on February 20, including the country-specific “reciprocal tariffs” declared under his emergency economic powers. The new Executive Order invokes the country’s 1974 Trade Act, which states that the president can impose rates for 150 days without congressional approval.

US/Israel-Iran Conflict: The United States and Israel conducted missile and drone strikes against Iran on February 28, resulting in retaliation from Iran and affiliated factions in the region. Major shipping lines and airline companies have actively avoided passing through the region, pushing the price of oil around USD 120 to 150 per barrel. In the Philippines, key oil companies have signalled staggered price increases in the following weeks, starting at PHP 1.20 to PHP 1.90 for gasoline, diesel, and kerosene per liter. It is likely that prices of food, transportation, and energy will increase in the following weeks.