The Philippine Economy: Growth, Inequality, and Public Confidence
- cenpeg inc
- Jul 24
- 18 min read
A Message on the Fifth State of the Nation Address of President Ferdinand R. Marcos Jr., 27 July 2026
Prof. Emmanuel A. Leyco
President and Chief Economist, Credit Rating and Investors Services Philippines, Inc. • Senior Fellow, Center for People Empowerment in Governance (CenPEG) • ealeyco@crisp.com.ph
On the fourth Monday of July, as the Constitution commands, the President will stand before a joint session of Congress at the Batasang Pambansa to deliver his fifth and penultimate State of the Nation Address. The organizers have promised austerity: no red carpet, no long gowns, a thousand guests in simple Filipiniana — a ceremony pared down, by the House’s own account, in deference to an energy crisis that emptied household budgets and an earthquake that shook Mindanao. The gesture is fitting, and it sets the standard by which the speech itself should be judged. A nation that has been asked to tighten its belt is entitled to an address that tightens its claims — an accounting as unadorned as the hall in which it is delivered.
This message offers a framework for that accounting, on the theme by which the Marcos presidency’s economic stewardship will ultimately be measured: growth, inequality, and public confidence. These are not three separate report cards. They are one ledger read three ways — what the economy produced, who received it, and whether the people believe the books.
I. Growth: The Milestone Against the Ledger
The presidency can claim, without embellishment, a milestone that eluded every administration before it: the World Bank’s reclassification of the Philippines as an upper-middle-income economy. Decades of accumulated growth, remittance resilience, and services dynamism crossed a statistical threshold on this President’s watch, and history will record it so. But a classification is a certificate, not a condition. Set the certificate against the ledger of the four years that produced it, and the distance between the statistic and the street becomes the true state of the nation.
Begin with prices, because that is where every Filipino household begins. This administration’s term has been bracketed by two inflation crises. It opened with one: the post-pandemic and Ukraine-war surge that drove headline inflation to 8.7 percent in January 2023, the highest in some fourteen years, with food and rice prices doing the heaviest damage to the poorest tables. It closes with another: the Iran war pushed inflation to a three-year high of 7.2 percent in April 2026, easing only to 6.4 percent by June with core at 4.4 percent — and with pump prices, as of this writing, still roughly a quarter above their pre-war levels on the Department of Energy’s own common-price monitoring as of early July, with the tops of the Metro Manila station ranges still in the nineties — and now set to widen sharply: on the eve of SONA week itself, the Department confirmed an “extra-large” round effective 21 July, with diesel and kerosene rising by more than ten pesos per liter and Metro Manila prices expected to cross one hundred pesos at the top of the range, lifting diesel to roughly half above its pre-war level. In between lay a brief, genuine disinflation, with inflation cooling to around two percent through much of 2025. And on both occasions, the burden fell heaviest where the budgets were thinnest: at the first crisis, inflation for the bottom thirty percent of households reached 9.7 percent in February 2023 against a headline peak of 8.7; at the second, it hit 8.5 percent in April 2026 against a headline of 7.2, with the transport index for the poorest running above eighteen percent. The honest arc of the term, then, is not price stability interrupted; it is two crises separated by a truce — and both crises were regressive. A family that has spent four of the last four years budgeting against either the price of rice or the price of diesel has lived a different economy from the one the classification describes.
The promise against which this record must be measured is the President’s own, and it was a promise about affordable living made in its most concrete possible form: rice at twenty pesos per kilo. That pledge, the signature of the 2022 campaign, has since been operationalized as the “Benteng Bigas, Meron Na!” program — a targeted subsidy through Kadiwa and NFA outlets, limited to vulnerable groups and to ten-kilo allocations, piloted in the Visayas in May 2025, declared at the fourth SONA to be a promise proven and kept, and expanded nationwide in 2026 precisely because fuel-driven costs were pushing market prices the other way. The program is real relief, and it should be credited as such. But it is not the promise. The promise was a market price; what was delivered is a queue. In the market where the poor actually buy, regular-milled rice prevails at forty to fifty-one pesos per kilo in Metro Manila this July — two to two and a half times the promised figure — and the national average for well-milled rice stood at about fifty-six pesos in mid-June. More telling still, rice inflation for the bottom thirty percent of households was running at 15.3 percent in April 2026 and 17.9 percent in May — the very months the administration was scaling up the subsidy — so that the staple at the center of the affordability promise was, for the poorest, the fastest-rising major item in their basket. A government that needed a rice price cap in September 2023, a food-security emergency in February 2025, and a fifty-peso cap on imported rice in May 2026 has, by its own succession of emergency instruments, conceded that affordable living remains a policy objective rather than an achieved condition. The fifth SONA should say so plainly: the twenty-peso window exists and deserves defending; the twenty-peso economy does not yet.
Money has priced this experience without sentiment. The Bangko Sentral began this term with the policy rate at 2.0 percent; it was forced to 6.5 percent by late 2023 — the highest in seventeen years — to break the first inflation crisis, eased through 2024 and 2025 as prices calmed, and in June 2026 was forced to reverse course again, hiking to 4.75 percent into a supply shock, the most painful kind of tightening there is. The government’s own borrowing cost tells the same story from the market’s side: the ten-year yield touched 7.87 percent in May 2026, its highest since 2018, and stands at 7.26 percent today, after Philippine bonds turned in the worst performance in emerging Asia over the war period. An upper-middle-income economy borrowing at those spreads is paying a lower-confidence price for higher-income status.
The external referees have rendered the same verdict in slower motion. In four years, not one of the three global rating agencies has upgraded the Philippines. The high-water mark came in late 2024, when S&P lifted its outlook on the BBB+ rating to positive and an A-category rating seemed, for a moment, within the term’s reach. That optimism has since been surrendered: in 2026 S&P returned the outlook to stable, Fitch placed its BBB rating on negative outlook, and Moody’s turned negative on the banking system — with the growth downgrades from the IMF, ADB, and World Bank to 3.9, 3.8, and 3.7 percent citing, in the same breath, the war abroad and the “graft mess” at home. Read together, the actions say something precise: the milestone was earned by the economy’s past, while the outlook is being marked down by its present governance. Half of our growth downgrade was imported; the other half we manufactured ourselves.
And then there is work — where the paradox is subtlest and, for that reason, most telling. The administration can rightly note that headline unemployment fell to record lows in 2023 and 2024, in the low three-percent range. But by May 2026 the rate had climbed back to 4.8 percent, and beneath the headline the quality problem that has defined the Philippine labor market for a generation persists: underemployment stubbornly high, informality pervasive, and — in this year’s data — average weekly hours rising even as the jobless rate rose, which is the statistical signature of Filipinos working longer simply to stand still against prices. The problem under this administration has not primarily been the absence of jobs; it has been the presence of jobs that cannot outrun the cost of living. When the state’s premier research institute warns that a single energy shock could push 3.1 million people into poverty, it is telling us that upper-middle-income status sits on lower-middle-income buffers.
The fuel crisis, in particular, deserves an honest paragraph in the address rather than a victory lap. The projected July run-out did not materialize — but chiefly because the ceasefire came, the world released its strategic reserves, and Filipinos consumed less because they were priced out. The structural facts that made the country the first in the world to declare an energy emergency — 98 percent of oil imports from one region, domestic refining covering a third of demand, no strategic reserve, minimum inventories set for calmer decades — are today exactly what they were in February. Growth that can be halted by a single strait is not resilient growth. The fifth SONA will be credible on growth to the extent that it announces enactment, not intention: the strategic petroleum reserve and higher inventory requirements now pending in the energy committees, the diversification of supply made routine rather than waiver-dependent, and an infrastructure and logistics agenda that treats the cost of moving goods across an archipelago as the binding constraint it is. The milestone is real. So is the ledger. A serious address will claim the first only in the same breath that it answers for the second.
There is, finally, the question every commuter in Manila has asked and the address should answer: why did pump prices rise at rocket speed and fall at feather speed — and is the Department of Energy’s explanation, that firms price at the cost of replenishing their stock, a justification or an alibi? The doctrine deserves to be stated fairly before it is tested. In a deregulated market that imports most of its fuel as finished product, each week’s price reflects the replacement cost of the next cargo at Singapore benchmark (MOPS) prices — which, through this crisis, stayed elevated on regional refining margins even after Dubai crude fell back to its pre-war levels — plus each firm’s own premium, freight, insurance, and sourcing terms. As economics, that is defensible; it is how a trading nation that refines only a third of what it burns must price. But replacement cost is a symmetric doctrine, and its invokers have not honored the symmetry. If the pump must rise within days because the next cargo will cost more, it must fall within days when the next cargo will cost less; the expensive inventory already in the tanks is exactly as irrelevant on the way down as the cheap inventory was on the way up. The 2026 record fails that test on its face. The increases of March came in ten- and twenty-peso strides within days of the benchmark moves, while the declines were extracted week by week — three of the largest only after the government began prescribing minimum rollbacks under the emergency, with the Energy Secretary compelled to order that a computed rollback “must be equal or more,” a rule whose very necessity is an admission that voluntary pass-through ran one way. In the week of July 7, the Department’s own arithmetic showed a gasoline rollback of up to ₱1.75 per liter was warranted; firms posted an increase of ₱0.25 instead. And the doctrine is invoked asymmetrically: spot replacement cost justifies the hike on Monday, while “high-cost inventory still being sold” excuses the delay of the rollback on Friday — one cannot have both. The honest verdict, then, is a split one. Replacement cost genuinely explains part of the level: with refining margins in the region still swollen, the common price roughly a quarter above pre-war is not, by itself, proof of gouging. What replacement cost cannot explain is the timing — rockets up, feathers down is not a benchmark phenomenon but a market-conduct one, which is precisely why the Energy Secretary herself affirmed in April that possible collusion warranted investigation, and why the Senate’s pending cost-disclosure bills exist. The address should commit to finishing what those instincts started: a published, cargo-level accounting of replacement costs against pump prices for the crisis period, and a standing symmetry rule — the same speed down as up — as a condition of the deregulated bargain. There is movement to acknowledge: in announcing the 21 July round, the Department said it is returning to stricter rules, prescribing a single fixed adjustment — a maximum increase or a minimum rollback — in place of the ranges whose upper ends firms took on the way up and whose lower ends they ignored on the way down. That is the symmetry principle in embryo, adopted mid-crisis; the address should make it permanent.
II. Inequality: Who Paid for the Shocks
Upper-middle-income status is an average, and averages are where inequality hides. The statistical record of this term is unambiguous on one point: both times inflation struck, the poor carried the heaviest burden. In the first crisis, inflation for the bottom thirty percent of households peaked at 9.7 percent in February 2023, a full point above the headline peak, with food inflation for that group averaging 8.3 percent across 2023 and rice for the poorest rising nearly twenty percent year-on-year at its worst. In this second crisis, the pattern repeated exactly: 8.5 percent for the bottom thirty in April 2026 against a 7.2 percent headline, 8.4 percent in May, with the poorest facing rice inflation of 17.9 percent and transport inflation above eighteen percent — the two items a ₱20-rice, affordable-living presidency promised, above all, to protect. A food-and-fuel shock is a tax assessed in inverse proportion to income, and this term has levied it twice. The crisis year now ending was paid for at the median and below. When diesel at the top of the permitted range crossed P130 and gasoline P100 per liter, the adjustment was made by the jeepney driver weighing whether to abandon a route he had plied for twenty-nine years; by the 425 filling stations that closed; by commuters stranded as trips were cut; by the garment worker choosing between fare and food; by canteen owners shrinking portions as customers thinned. The state’s premier research institute warned that the crisis could push as many as 3.1 million Filipinos into poverty. Against that shock, the flagship relief — the ten-peso-per-liter transport subsidy — had by its thirteenth week disbursed some P268 million across 83,381 vehicles: roughly two hundred forty-seven pesos per vehicle per week, about twenty-five liters, one to two tank fills. The excise-suspension authority Congress granted in March shows no evidence, in the public record, of having been used while households absorbed the full tax on every crisis-priced liter. Meanwhile the labor market tells a subtler story of strain: headline unemployment of 4.8 percent looks benign, but falling underemployment alongside rising average weekly hours means many Filipinos are working longer to stand still — an adjustment that shows up in no shortage statistic and every family budget. Add the electricity bill shocks now under Senate inquiry, and the regional wound of the Mindanao earthquake, and the distributional ledger of this year is plainly written.
The address can meet this ledger with one structural commitment worth more than any list of ayuda: automatic stabilizers. Relief that is pre-funded, adequately sized to the shocks this economy demonstrably faces, and triggered by published thresholds — pump prices, food inflation, calamity declarations — rather than by discretion exercised after the queues have formed. The thirteen-week subsidy experiment proved the state can reach eighty-three thousand vehicles through a bank-administered mechanism; that is a pilot to be scaled and made permanent, not a statistic to be recited. A government that graduated its country to upper-middle-income status should graduate its social protection from improvisation to architecture.
III. Public Confidence: The Scarcest Commodity
The most consequential audience on July 27 will not be in the hall. It will be the citizen who has watched, in a single year, a Vice President stand trial before an impeachment court; legislators and contractors detained over flood-control projects that existed mainly on paper while real floods took real homes; a former President answering before an international tribunal; and a Senate that elected a president in May, witnessed a shooting incident in its own chamber, and ousted him by June — so that this SONA will be presided over by a Senate President and a Speaker who both assumed their chairs amid institutional turbulence. It was the President himself who, from the same podium a year ago, told the corrupt “mahiya naman kayo.” The question the nation will bring to the fifth SONA is whether shame has become consequence — and whether it will be allowed to run wherever the evidence leads, including to friends of the powerful.
This is not merely a moral question; it is an economic variable with a price printed daily. When the multilaterals cut our growth forecasts, they named governance alongside war. When the rating agencies rendered their split verdict — one outlook stabilized, another negative, the banking system outlook negative — the divergence was, at bottom, a disagreement about institutions. The bond market that pushed the ten-year yield to 7.26 percent is charging the republic a confidence premium on every peso it borrows for classrooms and flood control alike. Public confidence is not the soft counterpart of hard economics; it is the discount rate of the nation. Restore it, and every investment the SONA announces becomes cheaper; erode it, and no announcement is affordable.
The people have now priced it too, and their number is harsher than the bond market’s. The President enters this address at the lowest standing of his term. Social Weather Stations measured his net satisfaction at minus fifteen in the first quarter — thirty-three percent satisfied against forty-nine dissatisfied, the worst reading since he took office, with the deepest deficits precisely in Mindanao and Metro Manila, the geographies of the earthquake and the fuel queues. The follow-up trust survey, released a week before the address, found thirty-four percent of Filipinos with much trust in the President against forty-five percent with little. Pulse Asia’s second-quarter Ulat ng Bayan, fielded at the close of June and released on the eve of SONA week, recorded a seven-point fall in both the President’s approval and his trust ratings in a single quarter — to roughly twenty-nine and twenty-eight percent, from thirty-six and thirty-five in March — with disapproval and distrust each rising to about half the country. The two established survey houses now point the same way, and the timing is unsparing: the ratings collapsed in the same two quarters that delivered the second inflation crisis and the flood-control revelations. That is the political expression of this Note’s economic argument. A public that has twice paid a regressive tax on food and fuel, watched the promise of twenty-peso rice priced at fifty in the market, and read of paper flood projects while real floods took real homes, has rendered its own rating action — and unlike the agencies, it publishes no outlook, only a verdict, renewable each quarter. The address cannot poll its way out; it can only earn its way out, and the currency is the candor described below.
What would restore it is within the President’s gift on July 27, and it costs no appropriation. First, an unambiguous commitment that the accountability processes now underway — the impeachment court, the plunder prosecutions, the audits of the flood-control portfolio — will be resourced, respected, and left to their conclusions without management from the Palace. Second, a full and published accounting of the crisis spending itself: the twenty-billion-peso Malampaya drawdown, the subsidy disbursements, the emergency procurements made under relaxed rules — precisely because emergency spending under loosened controls is where the next scandal is customarily born. Third, candor about the numbers: an address that claims pre-war pump prices while common prices run a quarter above them and are rising again, that declares the twenty-peso rice promise kept while the poorest face rice inflation of eighteen percent in the open market, or that celebrates income classifications while three million risk sliding into poverty, will purchase applause in the hall at the cost of trust outside it. The austerity of this year’s ceremony should extend to the austerity of its claims.
The Standard for July 27
The fifth SONA arrives with two years of the term remaining — enough time to legislate, not enough to defer. On growth, the test is enactment: the energy security bills out of committee and into law, the reserve funded, the dependence profile moved. On inequality, the test is architecture: automatic, pre-funded, adequately sized protection in place before the next shock, not after it. On public confidence, the test is restraint: the institutions of accountability allowed to work, the crisis books opened, the rhetoric disciplined to the data. The Philippines closed this crisis year without running out of fuel; whether it runs out of patience is the question the fifth State of the Nation Address must answer. A President who matches the plainness of the ceremony with the plainness of the truth will find that candor, in a year like this one, is the most presidential language available — and the cheapest stimulus the economy could receive.
CRISP will publish its assessment of the address against these three ledgers following its delivery on July 27.
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Verification Note
Prepared under CRISP’s source-verification protocol. Verified this session: the SONA date, venue, austere format and its stated rationale, the 2025 “mahiya naman kayo” remark and subsequent flood-control detentions, the May–June 2026 Senate leadership crisis, the fuel-crisis record (inventories, interventions, subsidy disbursements of P268M across 83,381 vehicles through July 9, DOE common-price monitoring of ₱56.00/L gasoline RON95 and ₱55.00/L diesel pre-war and ₱70.00/₱69.90 for 30 June–6 July, mid-July Metro Manila top-of-range prices of about ₱96.10 gasoline and ₱90.77 diesel, the 7 July permitted gasoline range of −₱1.75 to +₱0.25, the 14 July diesel/kerosene hikes, and the projected “extra-large” adjustment of up to ₱10/L for 21 July), the ₱20-rice record (2022 campaign pledge; “Benteng Bigas, Meron Na!” Visayas pilot of May 2025 with 10-kg allocations for vulnerable groups; the fourth-SONA claim of the promise proven; 2026 nationwide expansion; DA Bantay Presyo Metro Manila regular-milled rice at ₱40–51/kg in July 2026; PSA national average well-milled rice of ₱56.15/kg for 15–17 June 2026; the ₱50/kg imported-rice cap approved May 2026 with a 60-day extension recommended), the PSA bottom-30% CPI series (9.7% in February 2023; 8.5% in April 2026 and 8.4% in May against headlines of 7.2%; rice for the bottom 30% at 15.3% in April and 17.9% in May 2026; transport at 19.5% and 18.2%; 2023 food inflation for the group averaging 8.3% with rice peaking at 19.8% in September 2023), the DOE replacement-cost explanation (finished-product imports priced off MOPS benchmarks; Undersecretary Sales on the lag versus Dubai crude; Secretary Garin on per-firm premium, freight, insurance, and sourcing), the April 2026 emergency pricing regime (prescribed uniform adjustments with rollbacks required to be “equal or more” than computed), Secretary Garin’s April affirmation that possible collusion warranted investigation, the Senate cost-disclosure bills, Dubai crude back near pre-war levels (~$65), and the PIDS estimate of up to 3.1 million at risk of poverty, April CPI of 7.2%, the 10-year yield of 7.26% with a 52-week peak of 7.87% in May 2026 (highest since 2018), and Philippine bonds’ worst-in-emerging-Asia performance. Carried from prior verified CRISP work: the World Bank upper-middle-income reclassification, June CPI of 6.4% (core 4.4%), the policy rate of 4.75% after the June 2026 hike, IMF/ADB/World Bank growth forecasts of 3.9/3.8/3.7%, May 2026 labor force readings (4.8% unemployment, falling underemployment, rising average weekly hours), and the 2026 external rating actions (S&P outlook to stable at BBB+; Fitch BBB, negative outlook; Moody’s negative banking system outlook). Stable prior knowledge, pre-dating this session’s sources: the January 2023 inflation peak of 8.7% (highest in about fourteen years); the BSP hiking cycle from 2.0% to 6.5% by late 2023 (a seventeen-year high) and the easing through 2024–2025 with inflation near two percent for much of 2025; S&P’s late-2024 revision of the BBB+ outlook to positive; and record-low headline unemployment in the low three-percent range in 2023–2024. Computed: common pump prices relative to pre-war (+25.0% gasoline, +27.1% diesel, DOE monitoring basis, 30 June–6 July); market regular-milled rice at 2.0–2.6× the ₱20 pledge; per-vehicle subsidy of ≈₱247 per week. Corrected this session: prior statements that pump prices stood 57–80% above pre-war, which were computed from net year-to-date adjustment tallies, are superseded — DOE common-price monitoring shows roughly a quarter above pre-war as of early July, with top-of-range Metro Manila prices near ₱90–96; Figure 4 and all dependent claims have been restated accordingly [prior figures excluded]. Flagged: the non-exercise of the RA 12316 excise authority is an absence in the reviewed record rather than a confirmed fact; the 98% import-dependence figure is as reported by cited sources; the characterization of March hikes as arriving in “ten- and twenty-peso strides” reflects the Energy Secretary’s own description of ₱10–₱20 weekly movements during the crisis; the attribution of asymmetric pass-through to market conduct is analytical opinion consistent with, but not established by, the pending collusion inquiry. Claim-to-source audit completed 20 July 2026; updated 20 July 2026 with the following. Verified 20 July: the DOE’s announced adjustments effective 21 July (diesel and kerosene up by more than ₱10/L, announced by Secretary Garin on 20 July, with Metro Manila gasoline and diesel expected to exceed ₱100/L at the top of the range; the 14 July round of about +₱1 gasoline and +₱2.62–4.62 diesel; the Department’s stated return to prescribing a single fixed adjustment in place of ranges; fuel inventory averaging 45.77 days as of 17 July); and the survey record (SWS Q1 2026 net satisfaction of −15, 33% satisfied vs 49% dissatisfied, the lowest of the term, with regional readings of −40 Mindanao and −31 Metro Manila; the SWS Q2 trust survey released a week before the address at 34% much trust vs 45% little trust; Pulse Asia’s Q2 2026 Ulat ng Bayan, fielded 28 June–3 and 6 July among 2,400 adults at ±2%, reporting the President’s approval and trust each down seven points from March with disapproval up five and distrust up seven). Computed: diesel common price after the 21 July round ≈ ₱83–85/L, roughly 50–55% above pre-war; Pulse Asia Q2 implied levels of ≈29% approval and ≈28% trust, with disapproval ≈50% and distrust ≈51%, derived from the verified March baselines of 36/35/45/44. Flagged: the exact announced 21 July gasoline adjustment was not verifiable in the reviewed record and is excluded — pre-announcement projections ran ₱3–4.50/L; per the author’s instruction, survey citations are limited to SWS and Pulse Asia, and readings from other pollsters (PUBLiCUS, RPMD) reviewed in earlier drafts are excluded.
About CRISP
Credit Rating and Investors Services Philippines, Inc. (CRISP) is a credit rating agency accredited by the Philippine Securities and Exchange Commission. Founded in 2008 by senior faculty of the Asian Institute of Management, CRISP operates a distributed, digitally native model and is governed by a Board of Directors, a Management Committee, and a rotating Rating Committee chaired by analysts according to area of expertise. CRISP Notes is the firm’s commentary series on the Philippine economy and capital markets. • crisp.com.ph • ealeyco@crisp.com.ph
Disclaimer
This commentary is published for general information only. It is not a credit rating, a rating action, an offer or solicitation, or investment, legal, or tax advice, and it should not be relied upon as such. The analysis draws on sources CRISP believes reliable as of the date of publication, verified under the firm’s source-verification protocol described in the Verification Note above; CRISP does not guarantee the accuracy or completeness of third-party information and accepts no liability for any loss arising from its use. Opinions expressed are those of the author as of the date of publication and are subject to change without notice.
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