July 4th, 2025
“The June CPI confirms that inflationary pressures remain well managed. Year-to-date inflation stands at 1.8 percent, which is comfortably within the Bangko Sentral ng Pilipinas target range. Food and energy prices have stabilized.
Global price trends continue to ease external cost pressures. These conditions allow us to shift greater focus toward sustaining growth. The recent downward revisions in growth projections, both from the Development Budget Coordination Committee and from institutions such as the World Bank and the International Monetary Fund, highlight the importance of reinforcing domestic demand and private sector investment.
The proposed National Expenditure Program for 2026 will be an essential tool in this effort. The planned budget of 6.793 trillion pesos reflects a 6.94 percent increase from this year’s level. However, with nominal gross domestic product expected to grow faster, the budget will constitute a somewhat smaller share of the overall economy.
This means the budget, while expansionary in absolute terms, will be contractionary in consequence. Government will take a smaller role in driving growth. That makes the quality of public spending far more critical than its quantity. Resources must be focused where the economic returns are strongest. Infrastructure, education, agriculture, digital transformation, and social protection remain the most effective levers for inclusive and sustained growth. These sectors not only generate jobs, but also raise long-term productivity. Of equal urgency is the challenge of credit transmission.
Real interest rates remain elevated, and lending activity has not yet returned to its pre-pandemic rhythm. Many small businesses and low-income households continue to face limited access to affordable capital.
Two sectors require immediate attention in this regard: housing and agriculture. These are labor-intensive, community-based, and highly responsive to financing. Yet they remain underserved by the formal credit system. Breaking these structural bottlenecks must be a national priority. Stronger credit guarantees, expanded concessional lending, and a more active role for public financial institutions will be essential in narrowing the gap between liquidity and accessibility.