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Freny C. Dongoya sells pares — Filipino comfort food made of braised beef in a sweet-savory soy sauce served with garlic fried rice — for PHP 120 (USD 2) a plate in Pasay City near the Philippine capital.

On most days, her customers are call center agents and motorcycle riders grabbing quick meals between shifts. She hasn’t raised prices despite higher food costs.

“If I increase prices, they stop coming,” she told BusinessWorld in Filipino. “Then I earn nothing.”

Ms. Dongoya works long hours, but she’s not counted in official job statistics. Like millions of Filipinos, she operates in the informal economy — without permits, tax registration or social protection.

Her situation captures the tension in the Philippine economy as it enters 2026.

Growth slowed sharply last year. Full-year expansion in 2025 eased to 4.4%, the weakest in 14 years excluding the pandemic. Infrastructure spending stalled and global trade softened. Yet officials continue to project confidence about reaching upper middle-income status.

On the ground, the picture looks uneven.

Outside business districts such as Bonifacio Global City and Ortigas, much of the workforce depends on low-paid, unstable jobs. Informal workers sell food, run small stores or take on casual labor. They cushion daily life for formal workers — but see little benefit from economic growth.

About 42% of the workforce or 20.6 million Filipinos remain in informal employment, according to estimates by IBON Foundation.

Christopher James R. Cabuay, an associate professor of economics at De La Salle University in Manila, said this helps explain why growth feels disconnected from household income.

“The current growth model is not structured to favor those in the informal sector,” he told BusinessWorld via teleconference.

“Most of the jobs we produce are in sectors like wholesale and retail trade or accommodation and food services. These employ many workers, but value-added per worker is small, so wages grow slowly,” he added.

Productivity gains are limited, and many workers stay near subsistence levels even during expansion years.

High-value sectors tell a different story. Business process outsourcing, finance and information technology earn in foreign currency and benefit from global demand. These industries helped stabilize growth during external shocks.

But their gains don’t spread evenly.

Analysts describe this as a two-track economy. One track is globally linked and relatively stable. The other is local, informal, and exposed to inflation and weak demand.

Warfredo Alejandro II works in the first track. The 27-year-old is a credit card specialist in the business process outsourcing sector. He has a steady paycheck and benefits. But he depends on the informal economy to manage daily costs.

He notes that affordable meals from vendors like Ms. Dongoya are the only way many employees can stretch their take-home pay.

“Street vendors make life affordable,” he said. “Without them, many employees would struggle to stretch their salaries.”

‘Hidden safety net’

Mom-and-pop stores and food stalls cluster around office towers for a reason. They sell cheap meals and essentials. For workers on entry-level wages, that matters.

Alellie B. Sobreviñas, an associate professor of economics at La Salle, said informal vendors act as an economic buffer for urban workers.

“They are a hidden safety net” especially for workers with long or irregular hours, she said in an e-mailed reply to questions.

When authorities clear sidewalks or relocate vendors without alternatives, costs rise quickly. Workers pay more for food. Commute times increase. Disposable income shrinks.

“That is an effective pay cut,” Ms. Sobreviñas said.

This does not mean informality is desirable, she said. Informal workers lack protection, access to credit and legal security. But removing them without replacing the services they provide creates pressures.

Formalization is often presented as the solution. In practice, it is costly.

For a small food vendor, registering a business requires multiple permits, fees and tax compliance. Costs can reach tens of thousands of pesos. For operators earning thin margins, that’s out of reach.

Ms. Dongoya pays her helpers PHP 400 to PHP 500 a day — below Metro Manila’s PHP 695 minimum wage, which only applies to formal jobs.

Mr. Cabuay said this creates another gap. Wage policies help those already inside the system. They do little for those outside it.

“The difference between what an informal worker earns and what they could earn in the formal jobs available to them is often not that large,” he said.

Many formal openings are also low skill: cleaners, service crew and laborers. They offer stability but limited wage gains. For some workers, informality still pays more.

This weak incentive slows formalization and keeps productivity low.

Economists warn that this structure limits long-term growth. Without stronger manufacturing and higher-value domestic industries, job quality will remain constrained.

Mr. Cabuay and his colleagues have raised concerns about government targets of 6% to 8% growth. Without upgrading jobs, growth will not translate into higher incomes for most workers.

Other barriers remain. Small firms struggle to access credit. Regulations are complex and public investment has been uneven.

The result is an economy that grows without lifting the base.

In business districts, consumption looks strong. Malls are busy and offices are full. But many households remain one shock away from hardship.

For informal workers, inflation hits first and hardest. Food and fuel costs rise, earnings don’t adjust quickly and savings are limited, yet their role remains essential.

Without informal vendors, entry-level formal workers would face higher living costs. Without informal transport, commutes would be longer. Without small retailers, neighborhoods would lose access to cheap goods.

The challenge is not choosing between formal and informal work. It is closing the gap between them.

That means lowering the cost of formalization, improving access to credit, and creating jobs that pay more because they produce more.

Until then, growth will continue to feel abstract for millions.

Ms. Dongoya doesn’t talk about gross domestic product targets. She watches foot traffic and rice prices.

“If customers disappear, I disappear,” she said.

For now, they keep coming. That says as much about the Philippine economy as any official forecast. — Erika Mae P. Sinaking

The peso could gain some support even amid some volatility in the foreign exchange market as the Philippines’ dollar reserves hit its highest level in over a year, analysts said.

“The relatively higher GIR (is seen) to provide a greater buffer for the peso exchange rate vs. the US dollar, as fundamentally supported by the continued growth in the country’s structural US dollar inflows especially from OFW (overseas Filipino worker) remittances, BPO (business process outsourcing) revenues, tourism receipts, foreign investments, among others,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail.

This came after the country’s gross international reserves (GIR) stood at a 16-month high of USD 112.515 billion in January, climbing by an annual 8.95% from USD 103.271 billion a year ago, based on preliminary data from the Bangko Sentral ng Pilipinas (BSP).

It was the highest GIR level since the USD 112.707 billion recorded at end-September 2024.

Month on month, it went up by 1.52% from USD 110.833 billion in December.

Analysts said the uptick in foreign reserves was driven by higher dollar inflows as well as valuation gains from the central bank’s foreign investments and gold holdings.

“The jump in GIR mainly reflects stronger dollar inflows — from exports, BPOs, and remittances — alongside higher valuations of the BSP’s foreign investments and gold holdings, which helped push reserves to their highest in over a year,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message.

International reserves are the central bank’s foreign assets held mostly as investments in foreign-issued securities, foreign exchange and monetary gold, among others.

These are supplemented by claims to the International Monetary Fund (IMF) in the form of reserve position in the fund and special drawing rights (SDRs).

The BSP said the level of dollar reserves in January is enough to cover about 4.1 times the country’s short-term external debt based on residual maturity.

It also equates to 7.5 months’ worth of imports of goods and payments of services and primary income, more than double the three-month standard.

“The latest GIR level ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans,” the BSP said in a statement released late on Friday.

Preliminary central bank data showed that its gold holdings amounted to USD 20.667 billion at end-January, surging by 75.87% from the USD 11.751 billion seen a year ago. It also climbed by 11.25% from USD 18.578 billion at end-December.

However, the central bank’s foreign investments fell by 0.47% year on year to USD 85.966 billion in January from USD 86.368 billion a year ago, and by 1.11% from USD 86.926 billion a month ago.

Meanwhile, the Philippines’ reserve position in the IMF stood at USD 730.2 million, up by 8.77% from USD 671.3 million a year earlier and by 0.4% from USD 727.3 million in the previous month.

SDRs — or the amount the Philippines can tap from the IMF’s reserve currency basket — were 5.66% higher at USD 3.943 billion as of end January from USD 3.732 billion last year. It was unchanged from December.

On the other hand, the BSP’s foreign exchange holdings soared by 61.48% to USD 1.208 billion from USD 748.2 million the prior year and by 83.34% from USD 659 million at end-December.

“With GIR now comfortably above traditional adequacy metrics, it gives the BSP enough firepower to smooth volatility, reassure markets, and keep the peso from overshooting even when global conditions turn choppy,” Mr. Ravelas said.

Meanwhile, John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the latest GIR level equips the BSP with ample resources to protect the peso from excessive fluctuations.

“While it cannot fully prevent depreciation driven by global USD (US dollar) strength and risk sentiment, the current reserve level helps anchor market confidence and allows calibrated intervention to prevent disorderly currency swings,” he added via Viber.

The local unit had a weak performance at the start of the year as it continued to trade around the PHP 58- to PHP 59-a-dollar level. On Jan. 15, it closed at PHP 59.46 against the greenback, breaking the previous record low of PHP 59.44 seen just the day prior.

On Friday, the local unit gained 10.5 centavos to close at PHP 58.585 versus the dollar from its PHP 58.69 finish on Thursday.

The BSP expects GIR to reach USD 110 billion by yearend. — Katherine K. Chan

 

The Department of Budget and Management (DBM) expects government agencies to submit lower funding proposals for 2027 amid stricter vetting guidelines triggered by the flood control corruption scandal.

Acting Budget Secretary Rolando U. Toledo said requests may come in below the PHP 11-trillion plan last year, after the agency issued stricter guidelines in its 2027 budget call in preparation for the National Expenditure Program (NEP).

“Yes, we expect (lower proposals), but we cannot prevent them from submitting more than what is supposed to be,” he told BusinessWorld on the sidelines of a University of the Philippines School of Economics event on Feb. 6.

“But of course, given the guidance we’re providing them, we hope the proposals will be lower,” he added.

The DBM began preparing the fiscal year 2027 budget through a series of budget forums with government agencies and government-owned and -controlled corporations late last month.

“We amplified the call to safeguard our budget from corruption,” Mr. Toledo said.

Safeguards include requiring agencies to secure approval from Regional Development Councils for priority programs and projects, reinforcing coordination among national agencies, regional offices, and local governments to prevent spending that is misaligned with administration priorities.

Additionally, the DBM mandates that proposals are backed by data, past performance metrics, and detailed program plans with clear procurement and implementation timelines and milestones.

“This ensures that only implementation-ready, high-impact proposals receive funding, reinforcing both equity and the effective allocation of public resources,” he said.

Mr. Toledo also pledged stricter oversight and reforms, saying agency heads will be required to certify accounts payables using signed, notarized documents to ensure projects are legitimate and not “ghost” transactions.

He also said the agency’s Technical Innovations for the NEP Application will automate the Executive’s budget tracking and formatting, significantly reducing the time and risk of discrepancies in report generation and review, which is expected to be rolled out in fiscal year 2028.

Risk of underfunding

Analysts said a sharp cut in 2027 budget proposals signal more disciplined spending but risk underfunding of key programs and misalignment with economic priorities.

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the stricter guidelines will likely force agencies to scale back their 2027 proposals, as the DBM continues to stress that fiscal space remains tight.

“Lower proposals could help ease fiscal pressure, but the challenge now is to cut the fat without starving essential programs — so agencies need to be smarter, not just smaller, in what they submit,” he told BusinessWorld in a Viber message.

Mr. Ravelas noted that corruption tied to anomalous flood control projects pushed the government toward a more disciplined, longer-term approach to budget preparation, with tougher validation.

However, Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said that as the DBM tightens access to the budget, agencies may respond with fewer or smaller proposals, a move that doesn’t necessarily align spending with economic priorities or growth programs.

“You could end up with agencies abandoning worthwhile projects that support government economic goals simply because the access process is too burdensome, while the fundamental question of strategic resource allocation remains unaddressed,” he said in a Messenger chat over the weekend.

Mr. Lanzona said the lack of fiscal discipline amounts to “an austerity program without a clear goal,” warning it could cause delay rather than delivering meaningful budget reform.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said agencies may become overly cautious in budgeting, which may leave key infrastructure and social programs with less funding.

“While the corruption scandal may prompt more transparency and tighter justification of budgets, the shift will only be structural if reforms are institutionalized rather than treated as a short-term compliance response,” he said.

Unprogrammed appropriations

At the same event, Mr. Toledo rejected anew calls to remove unprogrammed appropriations (UA) from the national spending plan.

“The unprogrammed appropriation is not really a bad proposal, having that in the budget. What is wrong is how do we use unprogrammed appropriations,” he told reporters.

According to the DBM, the UA refers to funds that can be used only for specific projects when revenue collection exceeds targets or when additional grants or foreign funds are secured.

Mr. Toledo added that he will not recommend scrapping the UA, as many key projects are still awaiting approval. Without the UA, projects may delay implementation, he said.

“Just like for 2026, we have limited only to three particular lists of unprogrammed appropriations. One is for the foreign assistance project, the risk management program, plus the AFP (Armed Forces of the Philippines) modernization program,” he said.

Mr. Toledo also said he wants to continue limiting the standby funds to below 5% of the budget. — Aubrey Rose A. Inosante, Reporter

The government will pivot in 2026 toward targeted job support in sectors facing worker displacement, as the Philippines looks to protect employment gains that stayed within official targets last year, Labor Secretary Bienvenido E. Laguesma said.

The Department of Labor and Employment (DoLE) would prioritize job matching and infrastructure-related opportunities for construction workers and expand emergency employment and livelihood assistance for displaced workers in agriculture and fisheries, he told BusinessWorld in a Viber message on Sunday.

The DoLE would also step up skill upgrading and reskilling programs tied to climate-resilient and more stable, year-round jobs, he added.

“For 2026, DoLE will also work closely with partner agencies on skill upgrading/reskilling on climate-resilient jobs, and more stable, year-round employment,” Mr. Laguesma said.

The shift comes after labor market indicators for 2025 landed within benchmarks set under the Philippine Development Plan. The Philippine Statistics Authority’s Labor Force Survey showed the unemployment rate rose to 4.2% in 2025 from 3.8% in 2024. The underemployment rate was unchanged at 11.9% year on year in 2025.

While the figures point to resilience in the headline labor market, the data reflect the vulnerability of construction, agriculture, and fisheries sectors to weather disruptions, project delays, and seasonal swings.

Analysts said that the December labor data mask a sharp slowdown in job creation and rising volatility in key sectors.

In December, the jobless rate rose to 4.4% from 3.1% in the same month a year ago, while the underemployment rate improved to 8% from 10.9% a year ago.

The total employed Filipinos fell by 758,000 to 49.4 million in December 2025 from 50.2 million a year earlier.

“This is only partly attributable to the corruption scandal-driven decline in construction which fell by 550,000 year on year — other sectors also shed large numbers of jobs such as agriculture, manufacturing, and transportation and storage,” Jose Enrique “Sonny” A. Africa, executive director of think tank IBON Foundation, said.

For the full year, he noted there were only around 172,000 jobs added from 2024, “barely one-fourth of the historical average of around 700,000 annually in the last 50 years.”

“It is also the fifth worst year of job creation after contractions in 2000, 2017, 2019 and 2020 and just a 90,000 increase in 2015,” Mr. Africa said.

“Looking beyond just December round data, it is clear that the labor market is characterized by weakening job creation and extreme volatility,” he added.

Santiago Nolla, president of the National Union of Building and Construction Workers, said there were already massive layoffs in the construction industry in August 2025 as projects tied to anomalous flood control contracts stalled.

“We were no longer surprised because workers had already been feeling the impact, as early as August 2025 when the flood control scandal erupted, there was massive displacement of workers employed by the identified contractors,” he said.

Mr. Nolla urged the government to accelerate the resumption of projects, expand free training through the Technical Education and Skills Development Authority, and prioritize local hiring of displaced workers once project implementation restarts.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the services sector continued to cushion the broader labor market.

“The strong hiring in BPOs (business process outsourcing) and tourism-related services suggests that the Philippine labor market remains structurally resilient, with services continuing to act as a shock absorber when public spending and investment weaken,” he said.

“Looking ahead, policymakers should closely monitor business sentiment, tourism recovery, digital economy expansion, and global demand for outsourced services, as these will sustain services-led hiring,” he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said government underspending on infrastructure in late 2025, the exit of Philippine offshore gaming operators, and weaker investor sentiment were all major drags on employment last year.

“Going forward, catch-up spending of the government especially on infrastructure to make up for the softness in the latter part of 2026 based on priority anti-corruption/good governance measures and reforms… could help boost economic activities that would fundamentally lead to better local employment data,” Mr. Ricafort said. — Erika Mae P. Sinaking

Philippine inflation accelerated to its fastest pace in nearly a year in January amid a faster rise in rents and electricity rates, the Philippine Statistics Authority (PSA) reported. 

Headline inflation picked up to 2% from 1.8% in December but slowed from 2.9% in the same month last year.   

This was the fastest pace seen in 11 months or since 2.1% in February 2025.

It also marked the first time in almost a year that the consumer price index (CPI) hit the Bangko Sentral ng Pilipinas’ (BSP) 2%-4% target. 

The January clip was likewise above the 1.8% median forecast in a BusinessWorld poll of 18 economists but was within the central bank’s 1.4%-2.2% estimate for the month. 

“The main reason for the higher inflation rate in January 2026 compared with December 2025 is the faster price increase in housing, water, electricity, gas, and other fuels, which recorded a 3.3% inflation rate,” National Statistician Claire Dennis S. Mapa said at a news briefing on Thursday. 

Inflation for housing, water, electricity, gas and other fuels quickened to 3.3%, the fastest since 3.8% in August 2024.

According to the PSA, this commodity group had a 45.9% share in the overall inflation uptick in January.

Broken down, inflation for electricity rose to 6.5% year on year in January from the revised 4% in December, while rental prices picked up by 2.9% during the month from 2.4% in December.

This comes even after Manila Electric. Co. trimmed electricity rates by 16.37 centavos per kilowatt-hour (kWh) to PHP 12.9508 per kWh last month from PHP 13.1145 per kWh in December, which meant households consuming an average of 200 kWh paid PHP 33 less in their monthly electricity bill.

In January 2025, Meralco charged PHP 11.7428 per kWh.

The Department of Economy, Planning, and Development (DEPDev) said the government is enforcing programs to manage price pressures emerging from the energy sector. It includes improving the Department of Energy’s Net Metering Program by enforcing time-bound local permitting, simplifying utility documentary requirements and expanding consumer incentives.   

“The program allows consumers to install eligible renewable energy systems and export surplus electricity to the grid, helping lower electricity costs and support the energy transition,” the DEPDev said in a statement.

Mr. Mapa also noted that liquefied petroleum gas (LPG) added price pressures, as inflation settled at -2.8% in January from -5.1% in December.

In January, Petron Corp. hiked LPG prices by PHP 2.18 per kilogram (kg), while Solane imposed a P2.18-per-kg increase.

This means that the price of a household-standard 11-kg LPG tank ranged from P820 to P1,120 last month, based on data from the Department of Energy.   

Meanwhile, Mr. Mapa noted that lessors often begin implementing rental rate adjustments in the first month of the year, which likely propped up rental inflation in January.

“Our reading is that January marks the start of the yearly rental adjustments,” he said in mixed Filipino and English, adding there could be further increases in February and March.

Faster restaurant inflation

Meanwhile, faster electricity and rental rates drove up inflation for restaurants and accommodation services to 4% in January from 2.4% in December. This was the fastest clip since the 4.1% in September 2024.

For restaurants, cafés and the like, inflation picked up to 4.1% in January, from 2.6% in December.

“Energy prices are also rising because, of course, you’re using electricity — maybe rent, since rental prices for places are going up too, plus perhaps wages. So, these are contributing factors to those increases,” Mr. Mapa said.

However, slower inflation for the heavily weighted food and nonalcoholic beverages index tempered overall price pressures in January. 

Food inflation eased to 1.1% from 1.4% in December, as better weather conditions boosted local agriculture production and normalized prices.

Particularly, inflation for vegetables, tubers, plantains, cooking bananas and pulses slowed sharply to 3.3% from 11.6% in the previous month.

“The floods are over now. So, our provinces are producing again, particularly in Luzon,” Mr. Mapa said, adding that prices of some vegetables have normalized.

The PSA likewise saw slower price growth for corn, meat and other parts of slaughtered land animals, fish and other seafood, as well as oils and fats.

Rice prices

On the other hand, the decline in rice prices slowed to -8.5% year on year in January after nine straight months of double-digit dips. 

This marked a softer drop from -12.3% in December and was the slowest decline in rice prices in 10 months or since -7.7% in March 2025.

In January, the average price of local regular milled rice fell by 10.28% to PHP 43.29 per kilo from PHP 48.25 per kilo a year ago but inched up by 4.34% from PHP 41.49 in December, according to the PSA. 

Well-milled rice was likewise cheaper by 7.55% year on year at PHP 50.05 per kilo from PHP 54.14 but climbed by 3.73% from PHP 48.25 in December. On the other hand, the cost of special rice edged down by an annual 5.29% to PHP 59.79 per kilo from PHP 63.13 but went up by 2.42% month on month from PHP 58.38.

The Philippines reopened its market to imported rice on Jan. 1 after the government imposed a four-month ban in September.

PSA data showed that core inflation, which excludes volatile prices of food and fuel, likewise accelerated to 2.8% in January, from 2.6% in the same month last year and 2.4% in December.

January saw the fastest core inflation in one-and-a-half years or since the 2.9% print in July 2024.

Meanwhile, inflation in the National Capital Region (NCR) bucked the national trend, easing to 1.9% in January, from 2.3% in December and 2.8% in the prior year.

However, inflation in areas outside NCR matched the nationwide CPI at 2%, accelerating from 1.7% a month ago. Year on year, it cooled from 2.9%.   

Inflation for the bottom 30% of income households was also faster at 1.6% in January from 1.1% in December. However, it eased from 2.4% logged a year earlier.

Meanwhile, Mr. Mapa noted that the PSA is working on rebasing the CPI to 2025 from the current 2018, with the first 2025-based inflation report likely to be released by January 2027.

“Currently, the technical staff is identifying the weight adjustments using our 2025 Family Income and Expenditure Survey, as it’s still [ongoing],” he added.

Easing path

With inflation starting to pick up, the central bank may now be more cautious about further monetary policy easing.

Still, analysts see a sixth straight cut at the Monetary Board’s Feb. 19 review remaining on the table, especially amid lingering growth woes. 

“All in all, we think January’s CPI has made the path to further rate cuts rougher,” HSBC Global Investment Research ASEAN economist Aris D. Dacanay said in an e-mailed commentary. “Although growth has slowed to its slowest pace since 2011, barring the COVID-19 pandemic, inflation hasn’t been as benign as warranted over the past two months.”

“Cognizant of this risk, we still think the BSP will likely cut its policy rate in February, since we expect growth concerns to outweigh inflation when deliberating monetary policy,” he added.

Mr. Dacanay noted that the government’s move to lift its rice import freeze and the muted demand could impact commodity prices in the months ahead.

On the other hand, Chinabank Research projects that base effects would push headline inflation  to the upper end of the central bank’s target by the second quarter.

Food supply issues, elevated energy prices and higher transport fares as well as minimum wages could bring price pressures, it added.

“Still, with inflation projected to average within target this year, we think the BSP has room to continue cutting interest rates, possibly at its Feb. 19 meeting, to help support the sluggish economy,” Chinabank Research said in a note.

For 2026, the BSP expects inflation to average 3.2%.

“The inflation outlook continues to be benign while inflation expectations remain well anchored,” the central bank said in a statement. “For 2026 and 2027, inflation is expected to settle within the 3% ± 1 ppt target.”

The benchmark policy rate stands at an over-three year low of 4.5%, after the Monetary Board delivered a total of 200 basis points  (bps) in cuts since it began its easing cycle in August 2024.

“On balance, the Monetary Board sees the monetary policy easing cycle as nearing its end. Any further easing is likely to be limited and guided by incoming data,” it said.

BSP Governor Eli M. Remolona, Jr. earlier said that they could help spur demand to boost the economy by easing borrowing costs, if such a move would still ensure that inflation will remain low.

He left the door open to a 25-bp cut this month after fourth-quarter growth turned out weaker than they anticipated but noted that inflation will be their top consideration.

However, the Monetary Board maintained that they are nearing the end of the current easing cycle. — Katherine K. Chan, Reporter

The Philippine government should boost industrial output through targeted tax incentives while cutting reliance on borrowing, allowing the private sector to drive economic activity and support a slowing economy that showed signs of a “growth recession” last year, a congressional think tank said.

The Congressional Policy and Budget Research Department (CPBRD) said Philippine job data point to a recession based on an economic indicator that flags a looming slowdown when the three‑month average unemployment rate climbs half-a-percentage point above its past-year low.

“The burgeoning unemployment problem is likely related to the demonstrably hamstrung industrial sector,” the 24-page report, authored by David Joseph Emmanuel Barua Yap, Jr., Ma. Kristina P. Ortiz and Krishna Margaret U. Mirida, said.

The think tank said employment data breached the Sahm rule for five months from July to November 2025, while seasonally adjusted job figures from 2023 to 2025 showed the threshold was crossed for nine months from February to October 2025.

Seasonally adjusted job data from 2021 to 2025 showed that the Sahm rule was breached only in November 2025, it added.

“All outcomes indicate substantial labor market stress, with employment contracting by 1.76 million workers on average during Sahm — signal months in which the labor force declined or stagnated, and youth unemployment peaking at 3.2 percentage points year on year,” the CPBRD said.

“Viewed in conjunction with the appreciable slowdown of the Philippine economy in the third quarter, evidence suggests that the Philippines entered a ‘growth recession’ in the latter half of 2025,” it added, referring to the revised 3.9% gross domestic product (GDP) growth in the third quarter.

While a formal recession is defined as two consecutive quarters of contraction, recent economic data have raised concerns over a “growth recession,” where GDP growth remains positive amid rising unemployment and underemployment.

Philippine GDP grew by 4.4% in 2025, slowing from 5.7% in 2024, and below the Development Budget Coordination Committee’s 5.5%-6.5% goal. In the fourth quarter, GDP expanded by a weaker-than-expected 3% in a period usually buoyed by holiday spending.

Unemployment rose to 4.4% year on year in November despite the holiday hiring season, translating to 2.25 million jobless Filipinos, defying the usual trend of job gains during the period.

“The numbers constitute evidence that the Philippines may have been in a recession for most of 2025,” the CPBRD said.

The findings underscore mounting pressure on the government to push through reforms aimed at averting a full-blown recession. Policymakers should boost industrial activity by cutting tax and regulatory burdens, while continuing the state’s fiscal consolidation effort, the CPBRD said.

“Given the established linkages across industrial sector performance, quality employment generation, and income generation, the government is enjoined to pursue policies that would unleash the productive potential of Philippine industries,” it said.

Targeted tax exemptions, such as rebates or cuts for “high employment multiplier” industries like manufacturing, logistics and energy sectors, should be implemented to boost job creation and support the development of a sustainable industrial base, the think tank said.

“The cumulative burden of regulatory compliance costs and taxes spanning multiple agencies constrains firm productivity, expansion and job generation potential,” the CPBRD said.

Policymakers should also improve zoning by clustering industrial sites through a public infrastructure program in the suburbs, while cutting tariffs on goods that could enhance worker and production productivity to help spur economic growth, it added.

The CPBRD said the government should also establish a “robust dialogue mechanism” between the private sector and policymakers to ensure industrial policy remains responsive to evolving business needs.

There should also be a review of the wage-setting mechanism to ensure the current system remains effective and responsive to the job market, it added.

Policymakers should also rein in spending and avoid stimulus programs, the think tank said, warning that such measures could backfire and worsen the country’s debt position.

“Insisting upon yet another expansion in government spending to accommodate a stimulus program would inevitably lead to higher debt servicing requirements, an even larger debt overhang, and a heightened risk of a default,” it said.

The Philippines’ outstanding debt climbed to a record PHP 17.71 trillion in 2025, exceeding the projected year-end level of PHP 17.36 trillion by 2% and rising by 10.32% from PHP 16.05 trillion a year earlier.

This brought the outstanding debt as a share of gross domestic product (GDP) to 63.2% as of end-2025, up from 60.7% a year earlier, the Bureau of the Treasury said.

This marks the highest annual debt-to-GDP ratio in two decades, surpassing the 65.7% recorded in 2005. It also exceeds the 60% threshold that multilateral lenders consider manageable for developing economies, as well as the government’s end-2025 projection of 61.3% under its updated medium-term fiscal framework.

“At best, a stimulus program would be exchanging one crisis for another,” the CPBRD said. “At worst, it would compound the ongoing economic slowdown with a debt crisis.”

“Instead, the government is advised to aggressively pursue fiscal consolidation, improve public expenditure efficiency, and prioritize investment over consumption,” it added.

Meanwhile, the slowdown in growth could be largely attributed to the Philippines’ inability to attract investments, coupled with government underspending that has weighed on economic growth.

“This reflects deeper structural constraints such as weak private investment, uneven public spending, governance concerns, and external headwinds that have dampened confidence and productivity,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message. “Industry reforms that strengthen ease of doing business, infrastructure delivery, digitalization, and the overall investment climate are therefore critical.”

IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa said policymakers should look beyond tax breaks to spur industrial activity, stressing the need for broad and ambitious reforms to usher in a golden age of industrial development.

“The government really has to have much more ambition and industrial vision for the country,” he said in a Viber message.

“This includes trade protection, regulation of foreign investment to build domestic capacity, promoting indigenous science and technology, strategic coordination of credit and finance, tax and other fiscal incentives, public investment in infrastructure, and expanding mass purchasing power,” he added.

The government should also look at letting local officials handle industrial development policies, Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said.

“In this way, the industrial policy will be more in tune with the needs and resources of their communities,” he said in a Facebook Messenger chat. — Kenneth Christiane L. Basilio, Reporter