June 26, 2026 l The Manila Times
As a military pilot in my youth, I remember that a mid-flight stall was a bad situation we tried to avoid.
This happens when your aircraft climbs, loses power, and drops like a rock. Since your wings won’t provide lift and you lack engine thrust, the only way to recover is by quickly changing the direction of flight. Sometimes you correct by diving to gain momentum — counterintuitive, but you have to act fast to survive.
It’s like our economic situation today that needs the right path to recovery.
From the early 2010s until the Covid pandemic, the country enjoyed a growth acceleration. From an average real GDP growth of 2.81 percent annually in the 1990s, and 4.54 percent in the 2000s, growth in 2010-2019 averaged 6.41 percent, placing us among the fastest-growing economies in Southeast Asia.
However, it has stalled — and we must adapt to avoid crashing.
Amid global chaos, the Financial Executives Institute of the Philippines (FINEX) held its 6th general membership meeting and invited Prof. JC Punongbayan, PhD, to shed light on the country’s financial future and how we can recover from this economic “stall.”
He said geopolitical factors have moved from background risks to front-page crisis. Wars stretching from Europe to the Middle East have triggered conditions no one expected. The Middle East conflict that closed the Strait of Hormuz triggered the sharpest oil shock since 2022 — arguably worse than the 1970s. This accelerated global inflation, slowed growth, and unleashed creeping unemployment.
Headline inflation in the Philippines accelerated to 7.2 percent this April, the fastest pace since 2023. It is primarily supply-driven, with imported inflation weakening the peso to among Asia’s worst-performing currencies.
The resulting high prices are crippling for those at the poverty line — officially pegged at 11 percent of families, but OCTA Research estimates a higher 9.2 million families, or 35 percent.
Punongbayan also laid out our structural weaknesses: an economy dependent on a few dollar sources — remittances, IT-BPM, and semiconductors — with no alternative export engines being developed. The oil crisis added energy security to this list.
Annual growth slowed to 4.4 percent in 2025, and the country has permanently deviated from its pre-pandemic trajectory. Critically, the initial slowdown was self-inflicted, not externally driven.
Corruption scandal
Meanwhile, the public works corruption scandal has yet to yield convictions, and those involved remain politically entrenched. This has constrained investment confidence.
Investors cite governance failures, policy uncertainty, and high logistics costs. Foreign direct investments contracted 24.5 percent in January-October 2025 versus the same period in 2024. Investors are waiting for stronger institutions, clearer rules, cheaper power, and predictable regulations. This wait and see impasse demands resolute change.
On manufacturing, Punongbayan offers a divergent view. For decades, the East Asian tigers pursued export-led industrialization, integrating into the global economy and transitioning into higher-value services. The Philippines largely skipped this phase, leapfrogging from agriculture directly into services — behaving like a post-industrial nation before actually becoming one.
The traditional prescription was to lower business costs, improve infrastructure, and maintain competitive exchange rates. But Punongbayan believes that window has closed. Global manufacturing is slowing, automation is eroding labor-cost advantages, geopolitical fragmentation is reshaping supply chains, and latecomers face fierce competition — especially from China.
He may well be right. The country must now build a services-led model centered on IT-BPM, creative industries, tourism, health, education, and domestic services — diversifying away from traditional retail trade and financial services.
To leverage this, we must drastically improve human capital investment, which is now our biggest developmental constraint. A services-driven economy requires workers who are well-educated and healthy. Without serious reforms in education, primary health care, and nutrition, growth from services will encounter another stall.
We cannot afford to let that happen. Like that pilot in a stall, the recovery move may feel counterintuitive. But hesitation is not an option. We must act — and act fast.
***The views expressed herein are his own and do not necessarily reflect the opinion of his office as well as FINEX. For comments, email rsgoseco@gmail.com. Photo is from Pinterest.