In 2023 up to the first quarter (Q1) of 2024, we had the fastest-growing economy among our Association of Southeast…

In 2023 up to the first quarter (Q1) of 2024, we had the fastest-growing economy among our Association of Southeast Asian Nations (Asean)-6 peers, namely, Singapore, Thailand, Vietnam, Malaysia, and Indonesia. Now, our 2.8 percent gross domestic product (GDP) growth in Q1-2026 is the slowest. From being the most dynamic Southeast Asian economy only three years ago to the most sluggish now, the Philippine economy has reversed its fortunes yet again, in the familiar boom-and-bust cycle it has been persistently prone to, for nearly seven decades in the running. It was 35 years ago, in 1991, when we last grew the slowest among our Asean peers (other than in abnormal post-crisis rebounds).

It’s not just about GDP growth. We now also have the fastest price increases, with our 6.8 percent May inflation rate topping that of our Asean peers. We also have the worst unemployment rate at 5.3 percent as of Q1-2026. On all my three “PiTiK” yardsticks of economic health (for presyo, trabaho, and kita), we’re now the worst performer in the neighborhood. While it’s due to a combination of external and internal stresses, it’s more of the latter. We seem to be our own worst enemy, with much of our economic wounds being self-inflicted, hence could have possibly been avoided.

The detailed numbers tell the story. While the Iran War’s disruption of the world economy offers a ready explanation for our troubles, we were already moving downhill well before that. Price increases began speeding up (i.e., the inflation rate began climbing) late last year, driven by food prices that surged due to reduced supplies from typhoon-related crop damage and higher input costs. Domestic rice (palay) production indeed fell by 5.2 and 6.3 percent, respectively, in Q4 last year and Q1 this year.

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On the jobs front, after unemployment reached a historical record low of 3.1 percent in June and December of 2024, it rose again last year, especially in the second half, averaging 4.6 percent in Q4, then worsening further to 5.3 percent last quarter. What particularly worries me is that jobs in the agriculture, fisheries, and forestry sectors have continuously declined over the last two years and fell consistently and significantly in the last seven consecutive months. This continuing slide in the sector that is the very backbone of our economy must be arrested. Yet the quantity of jobs tells only half the story. The other disturbing development is in the quality of jobs: as of last year, over half (50.4 percent) of jobless Filipinos had actually gone to college, of which 38.2 percent were graduates (see “Our educated jobless,” No Free Lunch, 2/11/25). These figures remained high at 45 and 34 percent as of last April, respectively, with college-educated workers remaining the largest segment of our unemployed. These job market weaknesses have been with us well before external geopolitical pressures heightened with the Iran War.

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But it’s on the incomes and production front, i.e., the GDP slowdown, where lies our biggest challenge. There are three key observations worth noting. First, while the flood control corruption scandal triggered the economy’s dramatic slowdown, public construction spending was already declining even before the scandal broke out. President Marcos brought the scandal out in the open with his State of the Nation Address in late July (in Q3), but government construction already fell by a hefty 8.2 percent even in Q2 last year. Then it plummeted to -25.9 percent in Q3, and an even deeper, to -35.8 percent in Q4.

Second, fixed capital formation, or overall fixed investments that create jobs, had already been slowing down consistently since 2021, after the country emerged from the pandemic recession. From a rebounding surge of 9.9 percent in 2021, it softened every year thereafter down to 6.3 percent by 2024, then barely grew at 0.8 percent last year, weighed down by the deep dive in government construction. This continued its steep drop (by 31.5 percent) into Q1-2026, and has now pulled overall fixed capital formation to actually fall, at -2.7 percent. This should worry us because investment spending, which builds future productive capacity, should ideally be driving our economy’s growth rather than one-off consumption, which has always prominently been our economy’s growth driver. But even this has also slowed down to only 3 percent from previous rates exceeding 5 percent.

The third observation is a ray of good news: our exports growth of 7.8 percent has defied both a global trade slowdown induced by the Trump tariffs and our overall economy’s drastic slowdown. Our export growth far outpaces the overall economy’s 2.8 percent growth, and is driven by goods exports (rather than services exports like business process outsourcing, which has slowed down). This signals world market opportunities for our production sectors, where much of our homework should now focus.

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The bright side to it all is that we now have nowhere to go but up.

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