Tough times

In less than a month, BBM will be delivering his State of the Nation Address. Unfortunately, the current state is a mess.

In last year’s SONA, BBM urged his fellow politicians in Congress to show some shame… mahiya naman kayo… as he revealed massive ghost flood control projects that enabled well placed politicians to pocket hundreds of millions and maybe even a few billions of public funds.

People now want BBM to tell them what he has done about his corruption revelation. Have some big-time fat cat politicians been held to account for their corruption?

So far, only Sen. Jinggoy Estrada and former Sen. Bong Revilla are in jail as they face charges before the Sandiganbayan. One fat cat has avoided arrest by staying in Europe. The Ombudsman has hinted of more big names under investigation but so far, nothing much else.

Given how this big corruption scandal has devastated the economy, BBM must produce credible results to help bring back some confidence in our government.

Loss of confidence arising from the corruption scandal has damaged the economy. As if that was not enough, Trump’s war with Iran which has curtailed the world’s oil supply is also having a continuing negative impact on our economic recovery.

The Bangko Sentral’s consumer survey revealed that confidence has declined substantially in Q2 2026, as more households anticipated higher food and fuel prices. Consumers likewise expected higher unemployment and a weaker Philippine peso.

Consumers are limiting their expenditures to essentials like food and health. Households are also less likely to borrow and save.

This is bad news because our economy is 80 percent powered by consumers. Our economy’s growth would slow down significantly.

According to the BSP, its quarterly Consumer Expectations Survey also revealed that aside from concerns over higher fuel and food prices, governance-related issues also weighed on consumer sentiment.

On the other hand, the BSP survey on business sentiment showed improvement in May. That’s on hopeful expectations that consumer spending will pick up. But the consumer survey already indicated otherwise.

It seems the business sector is just trying to show a stiff upper lip by expressing optimism. But the true indicator of their feelings is their willingness to invest and expand operations. On that point, the BSP survey showed that the share of firms intending to expand operations has declined amid continued uncertainty.

The international situation is not helping us. The BSP said global inflation is expected to be somewhat higher in 2026, particularly in developing economies.

This dynamic is likely to weigh on consumption and investment. It also complicates the policy trade?off between supporting growth and containing price pressures, especially if supply disruptions extend into 2027.

Looking ahead, the Philippines is likely to face a weaker external position this year than previously anticipated as the conflict in the Middle East weighs on dollar inflows from investments and overseas remittances, according to the BSP. Our external position is expected to remain under pressure in 2026–2027.

Even non-trade inflows are expected to show signs of moderation. Remittance growth is seen to slow due to reduced deployment, particularly to the Middle East; IT-BPM earnings are likely to be tempered as AI takes jobs away in our BPOs. Weaker investment and tourism recovery amid high travel costs are also expected.

The big headache BBM must address is the threat of a severe El Niño. That will significantly hit palay and corn output, creating supply constraints. These agricultural losses will keep food inflation high.

Fitch Ratings has downgraded its outlook on the Philippine banking sector to “deteriorating.”

A rapid rise in unsecured consumer loans and an uncertain macroeconomic environment is expected to result in higher credit defaults and lower near-term profitability.

Indeed, official data from the BSP reveals that the banking industry’s gross non-performing loan ratio has climbed to an eight-month high. The construction industry accounts for a good part of this rise in bad debts.

The construction industry has been caught between a sluggish private property market and an abrupt freeze in public infrastructure cash flows.

Private developers are facing severe liquidity crunches due to oversupply and high interest rates. There is a high level of unsold inventory and high vacancy rates in commercial offices and mid-tier residential units. This means cash flows for developers have dried up.

Developers heavily reliant on mid-income housing (e.g., lower-tier projects or high-volume mass condos) are seeing cancellations outpace take-up rates. Buyers are defaulting or walking away because high bank mortgage rates make the long-term amortizations completely unaffordable.

High-end brands like Rockwell Land and premier Ayala portfolios are seeing 92 percent take-up rates. Wealthy buyers do not require heavy bank financing. The rich do not feel the pinch that everyone else does.

To protect their own capital, developers are delaying payments to general contractors. Contractors who borrowed heavily to fund raw materials and labor cannot meet their own bank obligations.

The public infrastructure pipeline — historically the safest revenue source for contractors — suffered structural disruptions. Bureaucratic spending was virtually frozen. Rigorous anti-corruption audits on flood control and regional road projects means it now takes longer for the government to pay and this has caused projects to stall.

Contractors who invested in heavy machinery and payroll for government contracts are now holding dead assets with no active state cash flowing in.

The medium- and small-scale construction contractors are particularly affected by the combined blow of private project cancellations and stalled public sector payments.

In the consumer sector, the cost of inputs continues to rise, making it difficult for restaurants to keep prices low enough to keep customers. Some have reduced sizes of portions (shrinkflation) hoping diners won’t notice.

But there is no hiding the tough times our economy is facing today. Hopefully, BBM’s SONA will give us hope that he at least knows our dire situation and has a sense of urgency. That’s something we haven’t seen in him or in most of our officials.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco