According to a survey by local economists, the Philippines has seen its weakest growth (excluding the pandemic) in two decades. This has been driven by both external and internal factors: economic pressure arising from the oil crisis in the Middle East, contraction of household purchasing power, and slowed government spending, among others.
The Oil Crisis
The oil crisis in the Middle East had widely affected countries that have large oil dependencies on Middle Eastern oil—but even those without dependency, the ripple effect within the broader economic landscape has affected those that would have been insulated. Akin to the housing crisis of 2008, or the pandemic of 2020, the oil crisis is an externality that affects nearly all markets, and from this, all people. Take the lay person, for example. The rising gas prices have reached the lay people; for it is the rising gas prices that have directly lowered purchasing power. In the Philippines, this has meant a larger allocation of spending to fuel, or for most, increased prices in commuting. There are also jobs that have been lost: jeepney drivers that took the brunt of the impact, bus companies that saw losses in profit, and so on.
To say that the oil crisis is merely an economic event is to understate its effect on every person dependent on all touchpoints in goods—electricity, transportation, food and salary, among others. This is due to the interconnectedness of the global (and local) supply chain tied to fuel for its sustenance. Despite the magnitude of this long-standing problem, the oil crisis is only one contributor to the current sluggishness of the growth of the Philippine economy.
The Weather
Another is the weather. The current rainy season has affected agricultural yields; agriculture is a vital part of the country’s GDP. As crop yields dwindle, our dependence on exports for products increase—and thus, this presents yet another blow to the (historically) export-dependent food chain of the Philippines. This leads to higher prices for consumers. Pair this with the increased cost of importing goods because of the oil crisis, and there is a strong catalyst for another pain point in everyday expenses. Once again, the purchasing power of the Filipino is reduced.
Infrastructure Spending
Internally, the government has wound down its spending. President Marcos’ crackdown on corruption, specifically in the infrastructure sector—where DPWH controversies remain fresh (and in some cases, ongoing)—has meant fewer projects being worked on. This reduced meaningful employment for construction workers; less investment on projects; and ultimately, lower growth in this sector.
Other Systemic Factors
The slowing economic growth was also most felt with the depreciation of Peso. In 2021, what used to be P51.31 per 1 U.S. dollar has now climbed to P61.21 exchange rate today, in 2026. Throughout years, the climbing value of U.S. dollars, while Philippine peso slows behind, does not only show the currency’s depreciation value; this also shows that import costs for raw materials, manufacturing products, and consumer goods have begun to be more expensive and ultimately created added financial burden to consumers.
In addition, the country’s infamous Income Lag has a direct effect on the country’s slow economic growth. Up until recently, Vietnam and Philippines were announced by the World Bank to have climbed as upper middle-income classification and while the announcement shows idea for the Philippines to have achieved more financial-driven economy, the truth is that this is merely the result of years and years of economic status catch-up. In real life, surveys still show that 52% of families rated themselves poor in March 2026, equivalent to 72 million Filipinos unable to meet basic needs.
The country’s inflation growth continues to rise, but the same cannot be said about ordinary workers’ income growth. With more money comes more spending.
The country’s laid-back approach to innovation and research and development are few of the systemic missed opportunities for attaining true gross financial growth. For example, reports show that Vietnam was able to achieve a fast economic growth due to their continuous investment for research and development, by allocating 0.53% of Vietnam’s GDP (Gross Domestic Product). By increasing investments towards innovation, Vietnam can be expected to be readily independent towards its research and innovation results.
The Philippines, in contrast, is still heavily dependent to other country’s innovation and growth. In 2026, the country’s allocation for research and innovation stays at 0.28% of GDP; a true world away from countries which demonstrate prosperity by leaning into research and innovation to produce better machineries, technology, and domestic products which can be used to ideally changed the world; or at least change the people’s lives.
A Turnaround Soon?
Though the current situation has slashed President Marcos’ inflation forecast down to 3.5%, there remains the opportunity for a turnaround, should the external and internal factors change. The rainy season is but a transitory phase for the country. The oil crisis, long as it is, shows the possibility of slowly improving given recent developments in global politics. And the infrastructure drought has meant a backlog in projects, meaning there will come demand for more projects once the focus shifts back to investment in this sector.
In addition, the country’s lacks research and innovation delivered through investments, indicates an increased opportunity that is left in the hands of innovative and resourceful Filipinos; to produce something that can ideally catalyst change. The slow growth must be addressed immediately, for research and innovation, to at least target past 1% for Gross Domestic Expenditure on Research and Development (GERD).
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