Economy faces fiscal, governance challenges

It could be said that the Philippines began the year on solid footing after hitting—or coming close to hitting—its goals in 2024.

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We were afloat. We were ready to paddle through the waters throughout the year.However, as the year progressed, the mood gradually shifted to confusion as the waters grew murkier and moved unpredictably. The country almost lost control over the gush of floodwaters that sifted through the national structure.

Economic managers had expected the relatively stronger 5.7-percent growth in the previous year to accelerate in 2025, but figures kept falling short of expectations, with year-to-date growth now standing at five percent-well below the fullyear target of at least 5.5 percent.

This was followed by downward adjustments to macroeconomic targets, including fiscal targets, as revenue and deficit goals are tied to output expansion, price hikes, and exchange rate movements.

Fiscal targets across the board were revised midyear as United States (US) tariffs, alongside escalating tensions in the Middle East, posed threats to the local economy.

This year's revenue goal was lowered to P4.52 trillion from P4.64 trillion in the previous Development Budget Coordination Committee (DBCC) meeting.

Revenue targets were also revised downward for 2026 (to P4.98 trillion from P5.06 trillion), 2027 (to P5.37 trillion from P5.63 trillion), and 2028 (to P5.91 trillion from P6.25 trillion).

In parallel with projected revenues, the fiscal deficit was also adjusted to 5.5 percent of gross domestic product (GDP) this year from the narrower 5.3 percent previously. Revisions were also made for 2026 (to 5.3 percent from 4.7 percent), 2027 (to 4.8 percent from 4.1 percent), and 2028 (to 4.3 percent from 3.7 percent).

What no one saw coming

What shocked private-sector economists was not the introduction of new tax measures but the erosion of confidence in the government following the unearthing of anomalies in flood control projects.