On May 7, Social Planning Secretary Arsenio Balisacan was asked in a press conference if the Philippines had slipped into recession. His the answer: “I don’t see it that way.” Inflation was under control, he said. Growth had “slowed down a bit.” With “structural adjustment” underway, growth momentum would return over time.
A few weeks later, his boss said the opposite. In a round table with Japanese journalists on May 19, President Ferdinand Marcos Jr. he agreed that stagflation is particularly worrying. “For the economy, the concern we have is the concern about falling prices,” he said, “so this is what we have been trying to control.” Marcos even hinted that the government might allow the price of “non-essential” food items to rise, because suppliers “feel the pinch.”
This is not the first time that President Marcos has directly disagreed with his economic managers. I remember that, a few years ago, former finance secretary Benjamin Diokno said the debt to GDP ratio was “it’s not a concern,” even as President Marcos flagged it as an emerging concern.
So which one is it? Are we in a period of stagflation or not?
What exactly do the numbers say?
Let’s start with the data. In the first quarter of 2026, GDP grew 2.8% year-over-year, the slowest non-catastrophic print run since the global financial crisis. It is the third consecutive quarter of rapid decline.
In contrast, inflation increased from 2.0% in January to 4.1% in March, then jumped to 7.2% in April. That’s the fastest in three years, and the highest month-on-month inflation in the Philippines’ 21st-century history.
Depreciation is a sign of slowing growth or “stagnation” as well as continuing, accelerating “inflation.” Secretary Balisacan is technically correct that there is no universally agreed upon numerical threshold.
But based on what we are experiencing right now, I would say that we are already experiencing a rapid decline, and we are living in a period of collapse.
The term stagflation was introduced in the 1960s and became popular after the 1970s oil crisis in the world, as well as caused by conflicts in the Middle East. Certainly, we are nowhere near the double-digit inflation rates we were experiencing in the 1970s to 1980s, and nowhere near the historic recession of 1984 to 1985. But for a country whose pre-crisis trend growth was around 6%, less than 3% growth with 7% inflation is not slow. It’s a double shock that’s characterized by rapid deceleration, albeit by modern standards.
Reduce inflation
The collapse in prices that we are experiencing has given great caution to our policy makers.
First, the Bangko Sentral ng Pilipinas (BSP) is obviously very concerned about the rapid rise in inflation. They are ready has increased the level of their policies in response to the increase in inflation in April, and just yesterday, May 21, BSP Governor Eli Remolona said it was “consider” yet another rate hike at the June meeting of the Monetary Board, the BSP’s highest policy-making body.
These decisions are rational and defensible if they believe that inflation expectations are at risk of being “rejected” or unstable. But the fact that they are raising interest rates in the economy amid a slowdown in growth shows that they are willing to tolerate further declines in output if that means better control of inflation. That’s the kind of tough business facing central banks around the world in inflationary periods like this one.
The BSP can only control inflation to a certain extent, and one could say that their efforts seem inconsistent with President Marcos’ hint that the government can “tolerate higher prices for some non-essential food items.” That signals to producers that price levels will be selectively controlled, and may strengthen inflationary expectations rather than contain them.
New P50 rice capat the same time, it treats the symptoms and not the distribution shock itself. Rice terraces have a long record in the Philippines of producing queues, parallel markets, and eventually recovery. It didn’t work inside September 2023when Marcos tried the same thing, and I doubt it will do much now.
Increase payment speed
At the same time, monetary policy makers seem to be very concerned about the sharp decline in government investment. President Marcos’ own admission says: public spending was delayed in the first quarter of 2026, and the government is now trying to “speed it up”.
Why was it delayed? A more plausible reading, which I have written about before, is the influx of the 2025 flood control corruption scandal. Disbursing officials, especially in the Department of Budget and Management (DBM), were reluctant to sign off on infrastructure projects. National GDP figures show that government construction has decreased from total construction for four consecutive quarters.
I think this is part of the reason for the sudden dismissal of acting budget secretary Rolando Toledo, and his place was taken by Kim Robert De Leonthe new budget secretary, 32 years old.
In the session of the House of Representatives on May 12, the chairman of ways and means Miro Quimbo touched upon the incoming secretary De Leon and called him as someone who “can be very strict” but also “very empoweringI take that to mean that the DBM under De Leon’s watch will not be too cautious to use, and will facilitate spending, especially the payment of legislators (hence the slow transition to spending).
What would a solid answer look like?
It does not inspire much confidence that the president and his economists cannot agree on the current state of the economy and explore it in solidarity.
But whether the current economic crisis is called a recession or not, the combination of high prices and weak growth is just as bad, and demands a proportionate and decisive response from the government.
First, the economic team should unite on a single public message. The team should agree on what configuration of growth and inflation it considers acceptable, and what they will do if the numbers get worse. Now they face a dilemma: control inflation with high interest rates but face a long-term decline in growth, or slow the decline but increase inflation. That short-term business must be carefully watched with a firm hand from our leaders, preferably President Marcos himself.
Second, if we decide to spend more aggressively, fiscal policy should reverse spending without curbing corruption. The political reality is that when the Independent Infrastructure Commission (ICI) was disbanded on March 31, the investigation into corruption has been completely lost, making it easier to remove payments that are legal on paper, but also more dangerous in practice.
I worry that the second impeachment of Vice President Sara Duterte could open the door to more pork barrel-like projects. possible payment to 257 MPs who voted to impeach Duterte. For the record, the shakeup in DBM happened just 8 days after the historic vote. Time invites some doubt. We should all watch that opportunity.
Third, when oil prices are still high, demand side response (target support or support, service contracting, travel fuel rebates, reserve storage for major products) still needs to be added. In the latest UPLIFT committee meeting, it was reported that the government had already provided 7.3 billion in cash assistance to about 1.4 million PUV drivers. Meanwhile, the government is looking for better ways to target support.
In conclusion, a slowdown in any other name would smell bad, and needs to be addressed just as quickly. However, I fear that the economic response may be disrupted by the increased political game, what with the upcoming trial of Vice President Duterte. July 6. – Rappler.com
Dr. JC Punongbayan is an associate professor at the UP School of Economics and author of False Nostalgia: Marcos’ “Golden Age” Myths and How to Unravel Them. In 2024, he received the Outstanding Youth Award (TOYM) for economics. Follow her on Instagram (@jcpunongbayan)
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