Philippine economic growth could pick up in the second half of the year as public infrastructure spending accelerates and inflation continues to ease, bringing the government's full-year growth target within closer reach, a World Bank economist said.

Jaffar Al-Rikabi, senior country economist for the Philippines at the World Bank, said growth could recover after a challenging first half that was weighed down by the Middle East conflict and the lingering effects of a corruption scandal involving infrastructure projects.

The Philippine economy expanded 2.6% in the first half, falling short of the government's 3.5%-4.5% growth target for the year. Mr. Al-Rikabi noted that growth in the first half of 2025 had been robust, creating a high base for comparison this year.

"How does growth pick up? Well, growth picks up by public infrastructure gradually coming online," he said during a panel discussion at the 12th Annual Public Policy Conference.

According to Mr. Al-Rikabi, the government plans to accelerate the implementation of infrastructure projects by the fourth quarter. Managing inflation, however, remains a challenge amid the Middle East conflict, he said, adding that continued moderation in price pressures could support private consumption. The pace of project implementation in the final quarter and the path of price pressures are therefore the near-term markers to watch as the second half unfolds.

"We did see some data towards the tail end of the first half of the year where inflation was beginning to moderate. Still high but was beginning to moderate. If that continues, then we should see private consumption probably picking up," Mr. Al-Rikabi said.

Solita Collás-Monsod, a former economy secretary and professor emeritus at the University of the Philippines, said the economy would need to expand by about 4.4% in the second half to post 3.5% growth for the full year.

"We will achieve 3.5% growth. I cannot believe that we will not be able to grow by 4.4%… for the second half," she said.

Ms. Monsod, however, questioned why the country should be satisfied with 3.5% growth when the Philippine Development Plan (PDP) had set higher targets. The original PDP targeted economic growth of 6.5%-8% annually from 2024 to 2028, while the midterm update lowered the target to 6%-7% for 2026 through 2028. The distance between this year's official target band and the plan's original ambitions underscores how much the country's growth expectations have been scaled back.

Beyond the near-term outlook, economists at the conference also pointed to institutional and investment constraints that could weigh on the country's longer-term expansion.

Bambang Brodjonegoro, dean and chief executive officer of the Asian Development Bank Institute, said the Philippines, as a middle-income economy, should pay attention to development planning and strengthen policy consistency, legal certainty and governance in order to attract more foreign direct investment (FDI).

"I think those are the three priorities in order to attract more FDI coming to the Philippines or any other economy," he said.

Mr. Brodjonegoro added that Southeast Asian economies could tap more investment from within the region, noting that intra-ASEAN investment remains at only around 20%.

"The potential is still big, but somehow we overlook this potential," he said.

For his part, the World Bank's Mr. Al-Rikabi said the Philippines faces a gap between the quality of its business regulations and their implementation, which raises the actual cost of doing business.

"So we want to reduce de costs for businesses by streamlining the procedures that firms go through to register," he said.

Ms. Monsod likewise argued that corruption and the uncertainty it creates have discouraged foreign investment. The concern echoes the same infrastructure scandal that, alongside the Middle East conflict, weighed on first-half performance, making governance a factor in both this year's growth path and the country's ability to draw outside capital.

"It is the corruption in this country, the uncertainty that it brings about that prevents foreign direct investment from coming," she said.

Asked what could be done over the next 12 months, Ms. Monsod said the anti-corruption drive should continue, adding that she would like to see Vice-President Sara Duterte-Carpio impeached.

"This is a personal opinion, I would like to see the Vice-President impeached and that will start the whole ball rolling, because if the Vice-President can be impeached so are the others," she said.

"And if the impeachment stays, the people will be empowered… they will continue their anti-corruption drive. The anti-corruption drive must continue, if we can do that in the next 12 months, we're on the way," she added.

Former economy secretary Jesus P. Estanislao, a professor emeritus at the University of Asia and the Pacific, said the Philippines should also draw up a longer-term strategy to attract more domestic and foreign investment.

"The biggest problem that we have is that we are unable to attract investments, both domestic and foreign, because of corruption," he said. "So in the next 12 months, what we need to do is address that."

Mr. Estanislao said the Philippines needs a strategic program that includes strengthening human resources as technologies such as artificial intelligence reshape the economy.

"We can do many things, but we have to put our heads together and come up with a good strategy now, leading to five years, 10 years, then investments will come," he said.

Reporting by Justine Irish D. Tabile; Source: BusinessWorld