Philippines’ economy grows 2.1% in third quarter as inflation accelerates to 7.8%

Key Facts

The Philippine Statistics Authority said in a statement issued on November 9 that gross domestic product grew 2.1% year on year in the third quarter of 2026, a slowdown that weakens the economy’s path toward the government’s annual target. On a seasonally adjusted quarterly basis, output grew 0.1% from July to September. The agency’s data showed that this followed growth of 0.6% in the second quarter, pointing to a loss of momentum in the latest quarter. The available evidence does not include verified data on the peso’s close in the November 9 session, so this report focuses on growth and prices. The contrast between modest annual growth and weak quarterly expansion presents a challenge for authorities as inflation accelerates to the highest level reported in the data for the period.

By sector, services provided the clearest support, rising 3.7% year on year in the third quarter. By contrast, agriculture, forestry and fishing contracted 4.8%, while industry fell 0.003%. The figures show a divergence across sectors, with services expanding while the other two sectors recorded no annual growth. On a seasonally adjusted quarterly basis, industry and services led contributions to growth, rising 1.5% and 0.4%, respectively. Agriculture, forestry and fishing contracted 7.7% quarter on quarter, a deeper decline than its annual drop.

Expenditure data showed household final consumption grew 2.4% year on year, while government consumption rose 6.8%. Exports increased 8.6% and imports 7.7% in the same quarter, while gross capital formation fell 0.2%. The figures place household spending and investment in the context of limited output growth, with government consumption and external trade posting higher rates. On the production side, the Statistics Authority said construction, financial and insurance activities, and public administration, defense and compulsory social security were the leading contributors to quarterly output growth. This reflects a difference between the drivers of growth when comparing expenditure components with the activities that supported the quarterly change.

In the broader national accounts, gross national income rose 2.7% year on year in the third quarter, and net primary income from the rest of the world increased 6.6%. But GDP growth of 2.1% remained slower than gross national income growth over the same period. The Statistics Authority had revised second-quarter GDP growth to 2.4% from an initial estimate of 2.3%, making the annual comparison between the two quarters based on the revised figure. Seasonally adjusted data cited by The Straits Times showed quarterly growth slowed from 0.6% in the second quarter to 0.1% in the third. The comparison highlights the extent of the quarterly slowdown, even after the previous quarter’s reading was revised upward.

Weak growth coincided with headline inflation accelerating to 7.8% in October from 7.2% in September, the Statistics Authority said, compared with a rate of 1.7% in October 2025. Transport inflation rose to 20.1% in October from 14.6% in the previous month. Inflation in housing, water, electricity, gas and other fuels also accelerated to 9.3% from 8.4%. The increases show that price pressures broadened during the month, alongside the weak third-quarter growth reading. November 5 was the publication date for the inflation data, not the month in which the 7.8% rate was recorded.

In U.S. markets, Reuters reported that traders increased bets on a second Federal Reserve interest-rate hike in December after a government report showed October job gains exceeded expectations. Reuters also reported that strong jobs data drove the dollar to its biggest gain in about six months on Friday, while the dollar fell against major currencies on Monday. This information does not establish that the U.S. currency rose during the November 9 session, nor does it document the Philippine peso’s close in that session. A specific daily move in the peso therefore cannot be linked to these developments on the basis of the available figures. The backdrop remains relevant to U.S. interest-rate expectations without determining the Philippine currency’s performance on the day the GDP data were released.

Philippine Economic Planning Secretary Arsenio Balisacan said at a news conference, as cited by The Straits Times, that the economy needs to grow 6.3% in the fourth quarter to reach the lower end of the government’s 2026 growth target of 3.5% to 4.5%. Growth averaged 2.5% in the first nine months of the year, according to the same remarks. This makes the final quarter pivotal to approaching the target range after the first three months of the fiscal year. The Statistics Authority is scheduled to publish fourth-quarter data and full-year national accounts in January 2027. Those figures will provide the next reading on the economy’s trajectory and how close it comes to the annual target.