Philippine Q1 Growth Slows Amid Flood-Control Scandal Fallout and Oil-Driven Inflation

Analysts expect the Philippines’ gross domestic product (GDP) to expand modestly in the January-March quarter. Nomura Global Markets Research projects a 2.9 % year-on-year increase, down from 3 % in Q4 2025 and well below the 5-6 % target set by the government. Deutsche Bank Research forecasts 3.3 % growth, while a BusinessWorld poll of 21 economists yields a median estimate of 3.4 %. The slowdown is attributed chiefly to a slump in construction activity linked to the ongoing flood-control scandal.

BusinessWorld

In 2025 a corruption controversy surrounding the national flood-control program curtailed government spending, reduced household consumption, and dampened business confidence. The scandal’s lingering effects have constrained public-sector investment and contributed to weaker private-sector demand entering 2026.

BusinessWorld

• GDP growth estimates: Nomura 2.9 %; Deutsche Bank 3.3 %; BusinessWorld poll 3.4 % (median).

BusinessWorld

• Inflation outlook: Nomura expects headline inflation to rise to 6.2 % in April 2026, the fastest pace in three years, with core inflation climbing to 3.7 % from 3.2 % in March. Deutsche Bank projects a 5.5 % headline rate, the highest since September 2023. A BusinessWorld poll of 17 analysts estimates the consumer price index at 5.5 % for April, slightly below the Bangko Sentral ng Pilipinas (BSP) forecast of 5.6-6.4 %.

BusinessWorld

• Fuel prices: Pump prices have recently adjusted to PHP58 per liter for gasoline, PHP28.18 for diesel, and PHP17.71 for kerosene.

BusinessWorld

Higher inflation threatens to push core prices above the BSP’s 2-4 % target, prompting the central bank to monitor second-round effects from global oil price shocks that are already spilling into fertilizer, transport and food costs. Slower growth and subdued private-sector spending raise concerns about fiscal sustainability and could limit the government’s ability to meet its 5-6 % growth ambition.

BusinessWorld

The BSP has warned that “second-round price effects from the war emerged earlier than expected,” urging caution as energy-driven inflation spreads to other sectors. The Philippine Statistics Authority (PSA) is scheduled to release the official Q1 GDP figures on Thursday and the April inflation data on Tuesday.

BusinessWorld

Analysts highlight the construction sector’s contraction as a direct consequence of the corruption controversy, noting that “weak sentiment and rising costs” are suppressing household consumption. Deutsche Bank also points to “high base effects from a front-loading of government spending in Q1 2025” that may distort the current growth picture.

BusinessWorld

• Growth estimates: Nomura (2.9 %) vs. Deutsche Bank (3.3 %) vs. BusinessWorld median (3.4 %).

BusinessWorld

• Inflation forecasts: Nomura (6.2 % headline) vs. Deutsche Bank (5.5 % headline) vs. BusinessWorld poll (5.5 %).

BusinessWorld

Actual figures await PSA publication, leaving a gap between forecasts and confirmed data.

BusinessWorld

• “We expect GDP growth to moderate further to 2.9% year on year in Q1 from 3% in Q4, still led by a slump in construction activity due to the corruption controversy,” — Nomura Global Markets Research

BusinessWorld

• “We also expect private sector spending to remain subdued, particularly household consumption, weighed by weak sentiment and rising costs,” — Nomura Global Markets Research

BusinessWorld

• “While we expect some recovery in household consumption in the quarter, aggregate growth could be weighed down by high base effects from a frontloading of government spending in Q1 last year (+18.7% year on year) before the May 2025 midterm elections,” — Deutsche Bank Research

BusinessWorld

• “(The) Philippines (5.5%) and Thailand (1.5%) could see the largest increase in inflation by ~1.5%-point each, the former of which would be meaningfully above BSP’s 2-4% inflation target, but well-within BoT’s (Bank of Thailand) 1-3%,” — Deutsche Bank Research

BusinessWorld

The PSA will publish the official Q1 GDP report on Thursday and the April consumer price index on Tuesday. Depending on the outcomes, the BSP may adjust monetary policy to curb inflationary pressures, while policymakers will assess whether fiscal stimulus can be revived without reigniting concerns over the flood-control scandal’s legacy.

BusinessWorld