Our macroeconomic numbers are starting to look like the fading vital signs of a very sick patient who should be in intensive care. But the attending physician went off to Singapore to watch the F1 Grand Prix races instead.
Our GDP growth rate is at 2.3 percent, an over five-year low; headline inflation is 7.2 percent, a three-year high; BSP benchmark rate is five percent, kept elevated to curb runaway inflation and prevent aggressive capital flight and national debt is P19.61 trillion, an all-time high.
The BSP reports that the country’s dollar reserves plunged by a massive $4.85 billion in a single month, sinking to exactly $100 billion at the end of September 2026, with foreign debt servicing and peso stabilization as major drivers.
Because we import more (including basic food) than we export, our balance of trade is performing exceptionally poorly.
PSA data reveals that the country racked up a staggering $31.36 billion trade deficit in the first half of 2026. This is the highest six-month trade deficit ever recorded since data tracking began in 1991. By August, the cumulative year-to-date trade gap had widened even further to a massive $41.6 billion.
But the economy’s attending doctor was assured by multilateral financial institutions that it is just a cyclical “bump in the road” and will recover in 2027.
The World Bank, the International Monetary Fund (IMF) and the Asian Development Bank (ADB) have this expectation that several domestic and external shocks will soon fade.
The World Bank, for one, assumes that the governance environment will stabilize next year. No sane Filipino will assume that.
The ADB, for its part, thinks consumer inflation will fall sharply next year. The IMF notes that once external pressures subside, local inflation will follow and give the central bank room to resume its monetary easing cycle.
I thought bean counters are hard-nosed realists. They seem to be more like hopeful romantics to think that our problems are short-term and next year will be better.
How, for instance, can ADB think consumer inflation will go down when a Super El Niño hits the Philippines in 2027? That will drive up food prices even higher than it already is.
Indeed, the BSP Governor who is tasked to keep a hawk’s eye on inflation said El Niño is a principal worry.
Inflation is calculated as a year-on-year percentage change. The ADB and IMF are probably thinking of base effects or statistical math.
Because the current inflation baseline of 7.2 percent is already terribly high, even if El Niño escalates food prices in 2027, the rate of increase compared to the already exorbitant prices of late 2026 will slow down mathematically. The budget-weary housewife will need convincing on the relevance of this math.
As for energy prices, analysts are hesitant to predict any cooling without clear indications that Hormuz is absolutely open. Saudi Arabia is also now being bombed by the Houthis.
Besides, filling up the world’s depleted oil reserves will take two years, same with rehabilitating damaged production and refinery facilities in the Middle East.
The reality is not a return to pre-Iran war oil prices, but a market pricing in a new higher baseline. For an import-dependent economy like the Philippines, this means the economy will still be highly stressed.
Then there is confidence or lack of it. The Philippine Stock Exchange index is experiencing a multi-month low around the 5,670 to 5,730 range as of October 2026.
Driven by record foreign outflows, a weak peso and a 7.2 percent inflation, the market is trading at a depressed price-to-earnings ratio of roughly eight to 10 times. This drop shows a growing loss of investor confidence in the economy as a whole.
Given our economic elite’s lack of patriotism, they are likely redeploying capital by now to neighboring countries. Such a domestic capital flight will worsen the country’s economic “anemia.”
The economy’s doctor should also lose sleep that we are less than four percentage points away from breaching the ultimate debt tolerance levels set by credit rating agencies.
While BBM brushed off the issue as “nothing,” the nation’s debt-to-GDP ratio climbed to a 21-year high of 66 percent in the first half of 2026. This surge leaves very little room to maneuver before the economy faces harsh consequences.
Historically, a 60 percent debt-to-GDP ratio was considered the absolute safety limit for developing economies. However, we got a temporary lifeline, setting a 70 percent debt-to-GDP ratio as the absolute maximum threshold.
The government is currently trapped in a dangerous loop. It must continue incurring massive debt to fund basic services, but the interest payments on that very debt are starving essential public programs like education and healthcare.
Sovereign debt crowd-out is another problem. When the government issues retail treasury bonds yielding roughly seven percent for a short 2.5-year maturity, anyone with cash sees this as an unbeatable proposition.
Even banks will prefer buying government securities rather than taking a chance on local business owners. This chokes economic growth.
That’s also why the stock market is being abandoned. Blue chips reliably paying dividends of 4.5 percent to 5.5 percent (and that comes with the volatile risk of stock prices dropping), cannot compete with RTBs.
When the government offers a risk-free seven percent RTB, fund managers and wealthy individuals liquidate their stock portfolios to buy RTBs.
With the equities market failing to appreciate their true valuation, many companies use capital to buy back their shares rather than fund expansion plans, further dragging down GDP growth.
Unfortunately, the administration appears to be prioritizing immediate political self-preservation. Executive decision-making remains highly constrained by excessive political noise and a preference for public relations gimmicks (P20/kilo rice?) over aggressive domestic policy reforms.
A competent doctor must know the economy should be in intensive care and may soon need life support. But the attending doctor doesn’t seem to care (“it’s all in the air”) or is lost on what to do next.
Boo Chanco’s email address is bchanco@gmail.com. Follow him on X @boochanco