The Philippine economy has yet to enter “stagflation” territory despite a whirlwind of domestic and external headwinds, according to Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio Balisacan.

Speaking at a Thursday press conference on the country’s first-quarter growth results, the DEPDev chief said the Middle East conflict has not yet pushed the economy into stagflation—a condition marked by low growth, high inflation, and high unemployment occurring simultaneously.

“Well, I don't see it that way,” he said. “[A]lthough we saw slow economic growth [over the past three quarters,] I think we are moving away from that. And we have learned our lessons.”

The Philippine Statistics Authority (PSA) reported updated figures for all three indicators of stagflation over the past three days.

On Tuesday, the PSA said headline inflation surged to 7.2%, the highest in three years, as price pressures from the global oil shortage intensified. On Thursday, it reported gross domestic product (GDP) growth slowed to 2.8% in the first quarter—the weakest in five years, or since the height of the COVID-19 pandemic—both reflecting the impact of the ongoing energy crisis.

However, unemployment eased from 5.1% in February to 5.0% in March. While still higher than the 3.9% posted a year earlier, Balisacan noted the figure remains far below pandemic-era peaks.

“Unemployment still hasn’t reached the highs of the past, and we are seeing improvements in job quality over the last three years,” he said.

Both inflation and GDP growth have been adversely affected by the Middle East crisis. Domestic fuel prices climbed into the triple-digit-per-liter range, raising costs across goods and services, slowing production as businesses face higher operating expenses, and eroding consumer purchasing power.

Under a stagflation scenario, economies face a similar dynamic. Policymakers, including central banks such as the Bangko Sentral ng Pilipinas, are forced into a difficult trade-off between curbing inflation and supporting growth, often with limited policy space.

“We expect to [substantially improve] the ecosystem so that we can regain our momentum,” Balisacan said.

Meanwhile, in light of weaker-than-expected GDP figures, Balisacan said the Development Budget Coordination Committee (DBCC)—which he co-chairs—will convene next week, noting that a downward revision of the government’s 5% to 6% growth target is now “a foregone conclusion.”

“We don’t expect to achieve the kind of growth we projected a year ago, given recent developments,” he added.