Last February 25, 2026, groups of concerned citizens celebrated the fortieth anniversary of the People Power  EDSA revolution that toppled martial law rule and restored democracy to the Philippines.  The occasion was used to denounce the massive corruption related to the flood control scandal and to clamor for the swift punishment of the guilty.  The mood was understandably negative resulting in pessimistic expectations about the Philippine economy in 2026 and even beyond.  A good number of economic forecasts (including that of my institution—UA&P) were way below the average GDP growth over the last fifteen years which was 6 to 7 %.  Some even claimed that nothing much has been attained in growing the economy for the last 40 years. I am afraid some of us are allowing the dark view we have of our politicians to overly influence our perception of Philippine economic realities.

              I am glad that just two days later, one of the leading credit rating agencies in the world—S&P Global Ratings—announced that it remained optimistic on the Philippines’ growth fundamentals despite drags from the recent flood control corruption scandal.  S&P surprised many of the local pundits by announcing that it expects  the Philippine economy to rebound from the 4.4 % GDP growth of 2025 to 5.7 % in 2026. The main assumption was that the Philippine economy has strong fundamentals.  Once the flood control controversy waned (which I personally thought would  happen quickly because of the outstanding leadership of the new DPWH Secretary Vince Dizon), growth could get back to close to 6 %.  I am glad that most independent international institutions have the same optimistic view about the strong fundamentals of the Philippine economy.  Both the World Bank and the Asian Development Bank issued recent GDP forecasts that showed, despite its slowing down to 4.4 % in 2025,  that the Philippines will still be among the fastest growing economies in the Indo-Pacific region, together with India and Vietnam.
              Let me expound on what Mr. Yee Farn Phua, director for sovereign and international public finance ratings at S&P Global Ratings, gave as reason for his optimistic view about the recovery of the Philippine economy in the short run:  “Now, when we put the Philippines on a positive outlook one year plus ago, it wasn’t just because of improvement in climate metrics overnight.  It was really an observation of the fact that institutional settings in the Philippines have strengthened quite considerably over the last decades or so.  And that has led to very good growth outcomes and at the same time sustainable public finance.”

Let not our great disappointment with the poor quality of governance demonstrated by our political leaders blind us to the fact that the continuous stream of the best and the brightest technocrats heading a good number of our executive departments has, over the last forty years, resulted in stronger institutions and more enlightened economic policies.  Our Bangko Sentral ng Pilipinas (BSP) is considered one of the best in the world.  Our public finance officials have generally practiced great fiscal prudence, maintaining our fiscal deficits and debt-to-GDP ratios at very reasonable levels.  The private business sector and civil society have had no reason to complain about the professionalism of the people who worked at the former NEDA (now the Department of Economy, Planning and Development) and the Philippine Statistical Authority (PSA), the Department of Labor and Employment , the Department of Trade and Industry, the Department of Transportation, the Department of Social Welfare, Department of Science and Technology, Department of National Defense, the Department of Agriculture and other attached agencies.  The stakeholders of the Department of Migrant Workers, the Department of Information and Communications Technology, the Department of Justice, and the Department of the Interior ad Local Government are generally satisfied with their services.  The problematic ones are the Department of Education, the Department of Health, the Department of Human Settlements and Urban Development and the Department of Agrarian Reform.  For obvious reasons, the worst until the present leadership had been installed, is the graft-ridden Department of Public Works and Public Highways.

              Not only have institutions been strengthened over the last 40 years.  The most serious economic policy errors that accounted for  the long-term deterioration of the Philippine economy have been corrected over the last four decades.  The most significant reforms have been in the agricultural sector, the weakest link in the national economy and the least productive sector.  The main reason why the Philippines went from being one of the most developed economies in Asia—next only to Japan in the decade of the fifties—to the sick man of Asia by the end of the twentieth century was the utter neglect of the agricultural sector and the countryside, in great contrast with its peers like Taiwan, Thailand, Malaysia and Vietnam.  Fortunately, over the last twenty years or so, the Government has made significant strides in building farm to market roads, completing about 70,000 km.  of FTM  out of a national plan target of 130,000 km.  In contrast,Vietnam’s  rural modernization programs have created around 51,000 km of rural road networks linking villages, farms and markets. The BBM Administration has assigned the highest priority to food security, departing from the traditional practice of giving short shrift to agricultural development. In fact, during the disastrous year of 2025 when GDP grew at the slowest pace in fifteen years (excepting the abnormal period of the pandemic), the agricultural sector posted an impressive 2.6 % growth rate (compared to an average of 0 to % over the last decade or so).

              The second most serious policy error of the past was the adoption of an import-substitution, inward looking industrialization strategy that was supported by very high tariff walls, overvalued peso and subsidized interest rates.   Thanks to the liberalization, privatization and deregulation measures adopted by the Ramos Administration (1992 to 1998), the Philippine economy was rid of this huge obstacle to economic progress.  The third major obstacle to Philippine long-term growth was the ultra-nationalistic provisions, found in the very Philippine Constitution, of limiting foreign direct investments.  In great contrast, Vietnam—while still considering itself a socialist State—allowed as much as 100 foreign equity in vital infrastructures and other strategic industries.  Fortunately in 2020, through a simple redefinition of the term “public utility,” investment of foreigners in the equity of Philippine strategic enterprises, especially in infrastructures, was finally allowed.  These three game-changing policy reforms now constitute part of  what S & P called the strong foundation of the Philippine economy.

              There is still much work to be done, despite the fact that the Philippines is now considered as an upper-middle income, together with some of its ASEAN peers like Indonesia, Vietnam and Thailand.  Beyond targeting food security, the BBM Administration must ensure a much larger inflow of Foreign Direct Investments (FDIs) of some $15 to $20 billion annually and significant reforms in governance to avoid trillions of pesos to be squandered in corrupt practices, as happened as a result of the flood control scandal.  Only then can we achieve the necessary acceleration of GDP growth to 8% or more so that we can generate the resources needed   to bring down the very high poverty incidence of 16 % to single-digit in the near term. It is hoped that the BBM Administration will show signs of attaining these two other challenges before its term ends in June 2028.  For comments, my email address is Bernardo.villegas@uap.asia.