BILYONARYO NEWS CHANNEL | BNC.PH
August 3, 2025 3:35 pm
BY EDISON JOSEPH GONZALES
The economy continues to grow, but cracks are emerging beneath the surface. While the government touts resilience, a mix of slowing consumer demand, softening remittances, and rising public debt has many Filipinos questioning the true state of the economy.
To assess whether the country is in a mere downturn or entering a more sustained “silent crisis,” BNC’s “Follow the Money” with Robert Tan spoke on Friday with Dr. Luis Dumlao, associate professor of economics at Ateneo de Manila University.
The Philippines’ economy grew 5.4 percent in the first quarter, placing it among the fastest-growing in East Asia. Still, Dumlao pointed out, that figure falls short of the country’s long-term benchmark.
“That is below what is referred to as the equilibrium or steady-state growth of between 6 to 6.4 percent,” he said. “If we just show up to work every day, nine to five, the economy should naturally grow by that amount.”
According to Dumlao, the current figure signals a negative output gap, which is a sign that the economy is underperforming relative to its potential.
Dumlao cited a range of factors for the slower growth. “There’s a global economic slowdown,” he said, “but there’s also a demographic shift. Population growth has declined to 0.8 percent annually, and fertility rates are now below replacement.”
A slower-growing population, he said, translates directly into slower economic expansion.
He also pointed to overreach in economic policy. “Sometimes, there’s too much government instead of letting the private sector drive growth,” he said.
President Ferdinand Marcos Jr.’s recent State of the Nation Address outlined spending plans across multiple sectors. But Dumlao flagged a glaring omission: financing. “Everything on the spending side sounded good,” he said, “but there was no talk of public finance. All these good things cost money.”
Dumlao contrasted today’s environment with the period from 2009 to 2019, when the country increased its debt from P5 trillion to P8 trillion without triggering austerity. “We outgrew the debt,” he said. “There was growth, not contraction.”
Since the pandemic, however, that debt has jumped to nearly P17 trillion. “It’s easy to say we’re going to spend,” he said. “It’s like telling your kids you’ll buy them toys on a credit card. It’s harder to say we can’t afford it.”
Dumlao cast doubt on the 3.9 percent unemployment rate, noting that it compares favorably with Western economies but may be misleading. “The economy created 1.4 million jobs in May,” he said, “but underemployment increased by 1.7 million. That means the jobs created were low quality.”
An additional 300,000 workers shifted from full employment to underemployment. Dumlao argued that unemployment statistics understate reality due to the lack of jobless benefits. “In countries with unemployment insurance, people report being unemployed to access those benefits,” he said. “Here, if you’re not actively looking, you’re not counted. That makes our numbers look better than they are.”
Dumlao argued for transitioning from broad Ayuda cash aid to conditional unemployment benefits. “With Ayuda, you don’t need to be looking for a job,” he said. “Unemployment benefits are conditional – you have to show proof you’re looking, maybe even attend training. That improves the quality of the labor pool.”
While official data shows consumer credit at manageable levels—credit card debt remains under 1 percent of GDP – Dumlao expressed concern about untracked borrowing in rural communities. “In some areas, I’ve seen people hand over their ATM cards as collateral,” he said, citing interest rates as high as 36 percent annually.
He criticized vague lending disclosures. “There’s a law requiring disclosure, but it allows lenders to say ‘3 percent per month’ without making clear that’s 36 percent per year,” he said. “It sounds small, but it’s misleading.”
The peso’s decline has raised concerns, but Dumlao dismissed fears of a currency crisis – at least in the short term. “This year, we project more dollars will come in through remittances than go out through trade deficits,” he said. “In the long run, the peso will likely move sideways.”
Remittances have slightly dipped, but remain high enough to offset the country’s perennial trade shortfall. “We don’t have a choice,” he said. “We’ve always had trade deficits, and we cover them with OFW remittances.”
He noted that the central bank holds $105 billion in reserves, which discourages currency speculation. “You don’t bet against someone with that much in reserves,” he said.
Dumlao acknowledged the risk of overreliance on foreign income sources. But again, he cited the central bank’s reserve as a stabilizer. “It’s not a surplus or wealth,” he said, “but it’s a buffer. And it’s working.”
In uncertain times, Dumlao advised households to adopt a long-term investment mindset. “Pick your company, invest, and hold it,” he said. “This is not about buying and selling every day. When you need the money in 10 or 15 years, that’s when you draw from it.”
He said the risks remain significant and should not be underestimated. “The government has to make some tough choices,” he said. “And for individuals, financial protection comes from long-term planning, not just reacting.”
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