As far as one economist is concerned, the Philippines has crossed into stagflation pointing to factors like domestic government spending reductions, soaring costs of food, high price of oil and more, according to a news report by the Manila Bulletin.
To put things in perspective, posted below is an excerpt from the Manila Bulletin report. Some parts in boldface…
The Philippines has crossed the line from a standard cyclical slowdown into genuine stagflation, driven by global energy price shocks, domestic government spending cuts, and soaring food costs, according to a regional economist.
Speaking at “CFME Talks Macro Outlook: Global, Australia, New Zealand, and the Philippines” briefing hosted by Center for Financial and Monetary Economics (CFME) on Wednesday, Oct. 21, David G. Fernandez, senior fellow at CFME and visiting professor at Philippine Center for Economic Development (PCED), warned that consensus growth forecasts for 2026 have plummeted from more than five percent to around 3.2 percent.
When asked what markers signal the shift to genuine stagflation, Fernandez said: “Well, I think that we’ve crossed the line. The revisions indicate that that’s what markets are expecting.”
He added that near-term growth could fall below already lowered forecasts while inflation could exceed expectations, emphasizing that this outlook “has to do with—not [the] fault of the Philippines—but the oil prices and potentially significantly higher food prices.”
“Growth could even be below the lowered forecasts and that inflation could be even higher than the higher forecasts that people have,” Fernandez added. “I worry about is that the optimism or the consensus forecast that we get back to five percent growth and you see inflation come down could be too optimistic themselves.”
Stagflation is generally understood as the simultaneous occurrence of elevated inflation, stagnant economic growth, and high unemployment, although economists do not have universally accepted numerical thresholds for determining when an economy has entered such a period.
In his presentation, Fernandez said inflation projections have shifted sharply upward, from an initial 2.6 percent toward six percent, with headline consumer price index (CPI) inflation already reaching 7.2 percent.
He described the country’s near-term trajectory as an extreme stagflation story, with forecast revisions becoming increasingly severe and the Philippines remaining firmly “under the radar” for international investors.
The economic slowdown was reflected in second-quarter gross domestic product (GDP) growth, which fell to a post-pandemic low of 2.3 percent.
Fernandez cautioned that growth was cushioned by inventory stockpiling and a doubling of government fuel subsidies even as underlying domestic demand weakened.
He said public investment plunged by nearly 14 percent following public sector retrenchment linked to the flood control scandal, while private consumption growth dropped below three percent as family incomes were eroded by rising transport and food costs.
Fernandez said it remained very difficult to build a narrative for a strong recovery. While growth may have reached its floor, he projected that any subsequent rebound would remain shallow and well below the economy’s six-percent potential trend growth.
Compounding the energy crisis, he said, is a rapid acceleration of second-round effects, with businesses passing higher input costs on to consumers faster than in previous shock cycles.
Headline inflation reached 7.2 percent in both April and September, with Fernandez pointing to rice prices surging by more than 20 percent and transport costs climbing nearly 15 percent.
He also flagged the possibility of a “Godzilla El Niño” pushing food prices even higher, warning that consumers and policymakers may have to endure headline inflation hovering around seven percent for an extended period.
Meanwhile, Fernandez said the widening economic fallout has pushed the Philippines’ current account deficit forecast to more than four percent of GDP, underscoring the country’s vulnerability to imported energy shocks.
Let me end this post by asking you readers: What is your reaction to this recent development? Do you think the economist is correct that the Philippines has crossed over into stagflation? Do you think there is nothing the national government can do to lower the prices of oil, fuel and other things that are essential for Filipinos? Do you think the national economy will fall into a recession by early 2028?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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