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The Department of Budget and Management (DBM) proposed double-digit increases for the Education, Health and Transportation departments under the 2026 national budget, but reduced the allocation for the Public Works department by 12%.

The DBM on Wednesday submitted the PHP 6.793-trillion National Expenditure Plan for 2026 to the House of Representatives, just over two weeks after President Ferdinand R. Marcos, Jr.’s State of the Nation Address, where he acknowledged public frustration and promised reforms in health, education and transport.

Next year’s budget is equivalent to 22% of the country’s gross domestic product (GDP), and is 7.4% higher than the PHP 6.326-trillion national budget this year.

“The growth of our economy, the biggest contributor is government spending and infrastructure spending,” Budget Secretary Amenah F. Pangandaman told reporters after the turnover ceremonies. “Given what’s happening now, with global uncertainties, we also want to invest more in our people.”

The budget for the Education sector was increased by 16% to PHP 1.224 trillion from PHP 1.055 trillion this year, according to the President’s budget message.

This covers the allocation for the Department of Education (PHP 928.5 billion, up by 18.7%), state universities and colleges (PHP 134.9 billion, up by 6.1%), Commission on Higher Education (PHP 33.9 billion) and Technical Education and Skills Development Authority (PHP 20.2 billion).

“For the first time, the budget for basic and higher education has been increased monumentally to meet UNESCO’s (United Nations Educational, Scientific and Cultural Organization) recommended education spending target of at least 4% of the country’s GDP,” said Ms. Pangandaman.

National Government spending on education for next year would also meet the UNESCO-recommended 15-20% of total public expenditure.

“This is because we are determined to deliver immediate action on child nutrition, address the education crisis and support our youth so they can find jobs,” Ms. Pangandaman said. “If you have a young person who can read, who can study and is healthy, they will contribute to our workforce.”

Infrastructure

Next year’s budget for the infrastructure program stood at PHP 1.556 trillion, equivalent to 5% of the Philippine GDP, according to the budget document.

“We are fast-tracking infrastructure development to create more livable communities, modernize transportation systems and address long-standing challenges,” the DBM said in the budget document.

The Department of Public Works and Highways (DPWH) was allocated PHP 881.3 billion, 12% lower than this year’s PHP 1.007-trillion budget.

“There are still many ongoing (DPWH) projects,” Ms. Pangandaman said in Filipino. “If you peg it at the same level (as last year), their absorptive capacity, they might struggle.”

On the other hand, the Department of Transportation’s proposed 2026 budget was more than doubled to PHP 197.3 billion from PHP 87.2 billion this year.

The government is prioritizing 54 flagship projects next year such as the Bataan-Cavite Interlink Bridge (PHP 27.9 billion), Laguna Lakeshore Road Network (PHP 22.9 billion) and the fourth phase of the Pasig-Marikina River Channel Improvement Program (PHP 7.4 billion).

The government also earmarked PHP 124.1 billion for rail transport upgrades, including PHP 76.1 billion for the North-South Commuter Railway System and PHP 45.4 billion for the first phase of the Metro Manila Subway Project.

Around PHP 69.7 billion will go to so-called Sustainable Infrastructure Projects Alleviating Gaps  programs that involve the construction of roads, bridges and flood control projects.

The Department of Health was earmarked PHP 320.5 billion under next year’s budget, up by 29% from this year’s PHP 248 billion.

State hospitals in Metro Manila were allotted PHP 27.7 billion, while regional hospitals will receive PHP 99.5 billion to boost healthcare capacity.

The Defense department and its attached agencies, such as the Philippine military, was allotted a PHP 299.3-billion budget, up by 10.3% from PHP 271 billion for this year amid growing tensions with China in the disputed South China Sea.

The Philippine Army, Air Force and Navy will collectively receive PHP 260.6 billion under the proposed budget, while PHP 40 billion will go to the Armed Forces’ modernization efforts, based on the budget document.

The government is proposing a PHP 256.5-billion budget for the agriculture sector next year, 81% higher than this year’s PHP 141.7 billion.

Of this amount, PHP 153.9 billion will go to the Department of Agriculture (DA) and its attached agencies, PHP 45.1 billion for the National Irrigation Administration and PHP 17.4 billion for the Department of Agrarian Reform.

The budget for the DA’s National Rice Program went up by 37.8% to PHP 29.9 billion for next year, while the Rice Competitiveness Enhancement Fund will receive PHP 30 billion.

About P10 billion will go towards funding the Marcos administration’s Rice for All Program to help expand access to cheaper rice, with PHP 11.2 billion allotted for the government’s rice buffer stocking initiative.

No ‘AKAP’ funds

Next year’s funding for the Department of Social Welfare and Development stood at PHP 223.4 billion, which is 2.7% higher than the PHP 217-billion budget in 2025. The bulk or PHP 113 billion will go to the Pantawid Pamilyang Pilipino Program, while PHP 49.8 billion will go to social pension for indigent senior citizens.

The government did not allot funds for the Ayuda Para sa Kapos ang Kita Program (AKAP) for this year, Ms. Pangandaman said.

AKAP is a social welfare scheme that provides one-time cash assistance worth PHP 3,000 to PHP 5,000 to workers whose income falls below the poverty threshold. It drew criticism last year after concerns that its disbursement could be politicized by lawmakers.

Meanwhile, the government has allotted PHP 10.77 billion for confidential and intelligence funds (CIF), 11% lower than the PHP 12.1-billion budget this year.

Ms. Pangandaman said the Office of the President was allocated PHP 4.5 billion in secret funds, with the Defense department receiving PHP 1.9 billion under the proposed budget. The remaining funds would go to other agencies, like the National Intelligence Coordinating Agency and Anti-Money Laundering Council.

CIFs are meant to finance surveillance and intelligence information gathering activities, according to a 2015 joint circular between the Commission on Audit, Defense, Budget and Interior and Local Government departments.

On the other hand, the government plans to allocate nearly PHP 1 trillion in 2026 for debt servicing, taking up 14.4% of the proposed budget for next year. This is 12% higher than the PHP 876.73 billion allotted this year.

‘Limited fiscal space’

“While (next year’s budget) is 7.4% higher than this year’s PHP 6.326-trillion national budget, the economic team carefully considered the available fiscal space and worked diligently to tighten the budget,” Ms. Pangandaman said.

The government slashed agency budget proposals by 33% to PHP 6.793 trillion for 2026 from an initial PHP 10 trillion, by prioritizing expenditures that could support economic growth, she added.

“Given our limited fiscal space, we carefully evaluated all submissions,” said Ms. Pangandaman.

The government is targeting 5.5-6.5% GDP growth this year, and 6-7% growth from 2026 to 2028. It also aims to bring down the debt-to-GDP ratio to 60.4% by the end of 2025, and to 56.9% by 2028.

Nueva Ecija Rep. Mikaela Angela B. Suansing, who heads the House Appropriations Committee, said budget discussions will start on Aug. 18, giving congressmen nearly two months to scrutinize and approve the budget bill before submitting it to the Senate.

“From Aug. 18 to Oct. 10, we will carefully examine the budget,” she told reporters in Filipino. “We will ensure that deliberations for next year’s budget are thorough.” — Kenneth Christiane L. Basilio, Reporter

Philippine rice imports are projected to decline by 500,000 metric tons (MT) this year compared to initial projections due to the two-month import ban set to take effect in September, according to the United States Department of Agriculture (USDA).

In its Grain: World Markets and Trade Report issued in August, the USDA’s Foreign Agricultural Service estimated that the country’s rice imports will fall by 9.3% to 4.9 million MT this year, from an earlier projection of 5.4 million MT.

The US agency attributed the lower projections to President Ferdinand R. Marcos, Jr.’s order to suspend rice imports for two months beginning Sept. 1 to protect local farmers.

He made the decision after the Department of Agriculture recommended the two-month ban amid declining farmgate prices.

Despite the lower projections, the USDA report showed the Philippines will remain the world’s largest rice importer this year.

The Bureau of Plant Industry reported that 2.58 million MT of rice had arrived in the country as of Aug. 7. Last year, the country imported 4.81 million MT of rice.

Meanwhile, the USDA projected for the Philippines’ milled rice production to reach 12.37 million MT in the marketing year 2024 to 2025, while it anticipates an output of 12.3 million MT for the marketing year 2025 to 2026.

The marketing year for rice starts in July and ends in June of the following year.

Earlier this year, the DA said that it expects the country to achieve a record rice harvest of 20.46 million MT or even surpass it.

Data from the Philippine Statistics Authority showed that the first six months of palay production reached 9.08 million MT, up 6.41% from 8.53 million MT in the same period last year.

In 2024, the country’s palay production reached 20.06 million MT, the highest-ever harvest of the Philippines’ national staple.

Sought for comment, Federation of Free Farmers National Director Raul Q. Montemayor said that the original projection of over 5 million MT in rice imports “was excessive in the first place.”

“Removing the supply glut through the import ban, and hopefully reverting the tariff to 35%, will bode well for farmers in terms of palay prices,” he said in a Viber message.

“In any case, the original USDA projection of rice imports of more than 5 million tons was excessive in the first place,” he added.

Mr. Montemayor also noted that rice prices should not increase “given current international prices and ample supply in the market.”

However, he warned that the mere suspension of rice imports will only lead to the rescheduling of rice imports, and not necessarily reduce it.

“The import ban will temporarily halt further decline in palay prices but will also raise prices at the retail level. While import volume will be lower than last year, imports will remain substantial at around 4 million MT,” former DA Undersecretary Fermin D. Adriano said.

Samahang Industriya ng Agrikultura Executive Director Jayson H. Cainglet said that the impact of the import ban is negligible.

“The prevailing 15% tariff on imported rice remains unchanged. This low rate makes rice importation still highly profitable,” he said.

“While we welcome the import ban, the agriculture sector is steadfast in its appeal to restore rice tariffs to their original levels to discourage excessive importation and protect local producers,” he added.

For the marketing year 2024-2025, the USDA projects world rice imports to reach 62.04 million MT and reach 61.71 million MT in the following year.

Meanwhile, the USDA also projected a 4.2% decline in Philippine wheat imports for marketing year 2025-2026 to 6.9 million MT due to lower feed consumption.

It was initially expected to reach 7.2 million MT.

Vietnam to challenge Philippines’ import ban

Meanwhile, the Vietnam Food Association has asked the country’s Trade ministry to challenge a move by the Philippines to suspend rice imports for two months, two sources told Reuters, with traders saying it will harm local production.

The Philippines, Vietnam’s biggest rice buyer, said last week that it would suspend rice imports for 60 days starting from Sept. 1 in an effort to protect local farmers impacted by falling prices during the harvest season.

“The Philippines is Vietnam’s largest rice export market and the suspension would have significant impacts on rice production in Vietnam,” said one of the sources, a trader with knowledge of the matter.

The association and the Ministry of Industry and Trade didn’t immediately respond to Reuters’ requests for comments.

Vietnam exported 2.44 million metric tons of rice to the Philippines in the first seven months of this year, accounting for 44.3% of its total rice shipments over the period, according to official customs data.

Last year, the Philippine market accounted for 46.7% of Vietnam’s total rice exports, with shipments in September and October higher than monthly average.

Vietnam early this year signed a memorandum of understanding on rice trade with the Philippines, where rice production is often prone to flooding and typhoon risks. “They are suspending rice imports this year to protect their farmers ahead of an expected bumper harvest,” said a second trader based in Ho Chi Minh City.

Traders said the Philippines’ move to suspend rice imports will put pressure on export prices of Vietnamese rice.

Vietnam’s 5% broken rice was offered at $395 on Tuesday, down by nearly 30% from a year earlier, according to data from the association.

“We fear that prices will fall further if there’s the suspension,” the second trader said. — Justine Irish D. Tabile, Reporter with Reuters

Lawmakers should avoid compromising the proposed P6.793-trillion national budget for next year through congressional insertions, which could undermine the Philippines’ fiscal consolidation efforts and hamper growth prospects, analysts said on Tuesday.

President Ferdinand R. Marcos, Jr. on Tuesday received a copy of the 2026 National Expenditure Program (NEP) from Budget Secretary Amenah F. Pangandaman during a ceremonial turnover at Malacañan Palace.

The record PHP 6.793-trillion spending plan for 2026 will be formally submitted to Congress today (Aug. 13). It is 7.4% higher than this year’s national budget, and is equivalent to 22% of the country’s gross domestic product (GDP).

With the theme “Agenda for Prosperity: Nurturing Future-Ready Generations to Achieve the Full Potential of the Nation,” the Palace said next year’s budget “will build on the solid foundations laid over the past three years of (Mr. Marcos’) administration.”

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the 2026 budget will be pivotal in funding the Marcos administration’s priorities at the midpoint of his six-year term and is critical to keeping the reform agenda on track.

“A well-prioritized budget can spur infrastructure, social protection and job creation. But if questionable insertions divert funds from high-impact projects, they could dilute growth momentum and make fiscal targets harder to hit,” he said in a Viber message.

“Any misallocation at this point could slow the country’s trajectory and make catching up in the last two years far more difficult,” he added.

Next year’s budget is expected to face more public scrutiny after the 2025 national budget was hit with allegations of fund diversions, blank line items by the Executive and concerns over outsized public works allocations.

In his State of the Nation Address, Mr. Marcos warned Congress that he will not sign any General Appropriations Act (GAA) that is “not fully aligned” with the NEP.

“I am willing to do this even if we end up with a reenacted budget,” Mr. Marcos said.

However, Ms. Pangandaman earlier told BusinessWorld that a reenacted budget would hurt the economy and will force the government to fund projects that are not aligned with its 2026 plans.

“The 2026 budget will be pivotal because it’s the main vehicle for translating the administration’s growth and fiscal consolidation goals into concrete programs,” Mr. Rivera said.

The government is targeting 5.5-6.5% GDP growth this year, and 6-7% growth from 2026 to 2028. It also aims to bring down the debt-to-GDP ratio to 60.4% by the end of 2025, and to 56.9% by 2028.

Next year’s spending plan will also be key to how the Marcos administration navigates risks from shifting global trade dynamics, such as the US tariff policies, said Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc.

The US began to impose higher tariffs on most of its trading partners starting Aug. 7. A 19% tariff was slapped on goods from the Philippines, Indonesia, Cambodia, Malaysia and Thailand.

“The 2026 budget and how it is utilized will describe how the administration manages the economy through harsher economic conditions, especially as trade wars may continue to persist and investor sentiment may continue to be affected by it,” he said in a Viber message.

AJ A. Montesa, advisor at budget watchdog People’s Budget Coalition, said congressional insertions in the proposed national budget may redirect funds away from key administration priorities, channeling it toward lawmakers’ own interests.

“Congressional insertions represent political self-interest outweighing the public good,” he said in a Viber message.

“A single congressman doing it may be or seem harmless, but as a whole, congressional insertions can create an inefficient budget misaligned with long-term national needs,” he added.

The Marcos administration is prioritizing infrastructure, industry development, food security and climate resilience in its spending plan for next year, according to a Budget department briefer on the proposed 2026 spending plan.

The government should increase spending on health, social, education and agriculture, which are seen as “high-yield, high-multiplier and job-generating” sectors, Jose Enrique “Sonny” A. Africa, executive director at think tank IBON Foundation, said in a Viber message.

“The reorientation to more social spending immediately improves people’s lives while generating demand, creating jobs and pressing structural change,” he said.

While the national budget has grown annually, Mr. Africa noted that funding for sectors such as health and education has declined as a share of GDP, raising concerns over the government’s spending priorities.

“The fall in social spending as a share of GDP between 2024 and 2025 has to be reversed — health spending drops from 1.4% of GDP to some 1.1%, education from 4.4% to 4.3%, and social security, welfare and employment from 2% to 1.2%,” he said.

He added that more support should be extended to Philippine businesses, including subsidies, to help spur domestic industrialization. “The government needs to start on a more active domestic industrialization policy.”

“The new budget must target productivity and social well-being to keep the country in its growth path and faster economic activity,” said Mr. Erece.

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message, said the government must reconsider its no-new tax policy and weigh fresh revenue measures and improve revenue collections, as the proposed budget increase could exert additional fiscal pressure,

“The 7.4% increase adds fiscal pressure, especially with limited revenue levers,” he said, adding that it’s only sustainable if state spending is “laser-focused” on government priorities.

“The problem with expenditures in the past three years is that its level is as if we are still in a pandemic,” Luis F. Dumlao, an economics professor at the Ateneo de Manila University said in a Facebook chat. “It may be sustained within the next three years within this administration, but it won’t be beyond future administrations.” —Kenneth Christiane L. Basilio, Reporter with Chloe Mari A. Hufana

The Bangko Sentral ng Pilipinas (BSP) could possibly deliver another rate cut later this month, its top official said on Monday.

BSP Governor Eli M. Remolona, Jr. said a rate cut is “quite likely” at the Monetary Board’s next meeting on Aug. 28.

The central bank has so far lowered borrowing costs by a total of 125 basis points (bps) since it began its easing cycle in August last year. 

If the BSP lowers policy rates this month, this would mark its third straight rate cut. In June, the Monetary Board cut by 25 bps to bring the benchmark rate to 5.25%.

Mr. Remolona said they are expecting to deliver two more rate cuts this year.

“I think two is more likely than one. Two is still more likely,” he told reporters on the sidelines of the Economic Journalists Association of the Philippines Economic Forum.

However, he noted that the possibility of three rate cuts is “unlikely.”

“That would overshoot what we look at as the ‘Goldilocks’ rate, output gap. Our output gap is already small,” he said in mixed English and Filipino.

Mr. Remolona had earlier said that it would take “something very unusual” to warrant a third rate cut this year, such as a drastic slowdown in growth, which was also unlikely.

The economy grew by an annual 5.5% in the second quarter, supported by a rebound in agriculture production and faster household consumption.

For the first half, gross domestic product (GDP) growth averaged 5.4%, slower than the 6.2% a year ago. The government is targeting 5.5-6.5% GDP growth this year.

After the Aug. 28 meeting, the BSP will have two more policy meetings before the end of 2025.

Meanwhile, Mr. Remolona said inflation is still seen settling well within target this year.

“In terms of inflation, we think we’ll hit 2% in 2025,” he said.

“That’s much better than other emerging markets, they would hit 3.1%, and other advanced economies, we think will hit 3.3%. So, (the Philippines will have) lower inflation than advanced economies and emerging markets.”

Headline inflation sharply eased to a near six-year low of 0.9% in July, marking the fifth straight month that inflation settled below the central bank’s 2-4% target range.    

For the first seven months of the year, inflation averaged 1.7%.

“If you look at our forecasts, we see our inflation target remaining within reach. I think we still have work to do,” Mr. Remolona said.

The BSP expects headline inflation to average 3.3% and core inflation at 3.1% in 2027.

“Both are within our target. We’re hoping we can achieve that. I think that would help stabilize the economy, support investment, support lending by our banks,” he added.

Peso performance

Meanwhile, the BSP chief said they are not too worried about the peso’s recent performance.

“It’s not the number itself (we worry about), it’s the way the peso depreciates. If the depreciation is sharp enough over, say, two weeks, one month, that leads to inflation.”

The peso closed at PHP 57.04 against the greenback on Monday, strengthening by seven centavos from its PHP 57.11 finish on Friday. The peso fell to the P58-per-dollar level earlier this month amid hawkish comments from the US Federal Reserve.

“If there are swings like that, we want to dampen that, but we don’t want to remove the swing itself. We want to keep the peso at a certain level. We want to prevent it from weakening too much over a short period of time.”

Mr. Remolona said the central bank has been intervening in “small amounts.”

“We have a little bit of day-to-day intervention just to limit the volatility. We don’t want too much volatility. Volatility is bad for both imports and exports,” he said.

“Most of the time, it’s a strong dollar story rather than peso. But there are some episodes that are not like that. In the June episode, the peso depreciated but the dollar didn’t quite strengthen.” — Luisa Maria Jacinta C. Jocson, Senior Reporter