Slow burn collapse

When the economy grew faster than experts said it would, few people asked why, because the answer seemed plain enough: the country was doing something right.

From 2010 to 2018, the International Monetary Fund, the Asian Development Bank, and the World Bank kept guessing low, and the economy kept proving them wrong, so that by 2016 the only debate was how far above 6 percent the growth would go.

Remittances stayed steady, call centers hired, and cheap oil kept prices calm. It came mostly from a government that was spending heavily on roads, schools, and bridges people could see. Business owners trusted the numbers enough to invest.

The first crack came in 2019, when growth fell to 6.1 percent because the budget was reenacted, freezing public spending for months, and because prices had run hot and interest rates had gone up the year before.

Then the pandemic shut the country down, output fell by nearly a tenth in 2020, and the rebound of 7.6 percent in 2022 was the natural bounce of an economy that had been pressed to the floor and let go, or what the experts call the base effect.

In that year, President Ferdinand Marcos Jr. took office. His economic team set goals that sounded bold, anchored on a growth goal of 6.5 to 8 percent a year until 2028, a budget deficit reined in to about three percent of the economy, and debt brought back near 60 percent of gross domestic product.

These goals, however, rested on the premise that the government would spend heavily on public works while collecting more taxes, so that growth would pay for the borrowing.

If growth stayed high, the debt would shrink as a share of the economy, and the deficit would close on its own; but if the economy stalled, every part of the plan would turn against itself.

That is exactly what happened. Growth came in at 5.5 percent in 2023, 5.7 percent in 2024, and 4.4 percent in 2025, all below goals and forecasts.

Because the government borrowed on the assumption of a surge in activity, slower growth meant smaller-than-planned tax collections, while bills for past borrowing kept coming due.

Interest payments have grown to around a trillion pesos a year, and every peso that goes to lenders is a peso that does not go to classrooms, clinics, or farm roads.

The deficit then cannot shrink the way the plan said it would, because the plan needed the very growth that is missing.

Meanwhile, the money meant to drive the economy forward was not always doing so. The flood control scandal showed that billions of pesos in public works funds went to projects that were ghost, half-built, or substandard, and that contractors, engineers, and lawmakers helped themselves to the loot.

Thus, a road that exists adds to output because workers were paid, materials were bought, and trucks can now move goods faster. While a phantom structure adds nothing, yet the budget counts it as spent, and the debt that paid for it is real. So the country carries the cost of investment without receiving the benefit.

Then the scandal made things worse: agency officials, honest or otherwise, became afraid to sign anything, contractors stopped work, and real projects got stuck along with those that were fake.

Public spending, the engine of the plan, slowed at the moment the private sector was already nervous about high interest rates, a weak peso, and new American tariffs.

Investors, who decide where to put money by asking whom they can trust, began to wait, which is the most damaging way an economy can lose momentum.

All of this brings us to 2026, when the first half grew by only 2.6 percent, and economic officials under the Development Budget Coordinating Council cut their own target twice in a single year, from 6 to 7 percent, to 5 to 6 percent, and then to 3.5 to 4.5 percent.

Even the bottom of that last range needs 4.4 percent growth in the second half, a pace the economy has not matched in a year. When a government revises a goal twice in nine months, it is no longer setting targets but merely coasting along on the lackluster progress.

The Palace vowed the weakness is temporary, and economic managers said recovery has begun.

By the way, they uttered the same words before, only to prove that not even a semblance of direction was in place.