2026 budget deemed insufficient to stimulate economy even with accelerated spending

By Justine Irish D. Tabile, Senior Reporter

PLANS to accelerate public spending will not be sufficient to boost growth if these remain based on spending outlined in the 2026 General Appropriations Act, an analyst said.

“Any plan to ‘accelerate’ public spending will not really boost growth if this is a spending plan that remains anchored on the 2026 budget deliberated and enacted before the US attack on Iran and the resulting oil price shocks and other global and domestic economic disruptions,” Jose Enrique A. Africa, executive director of the think tank IBON Foundation, said via Viber.

“Spending in these changed conditions will only have a stimulus effect if this involves new and additional spending beyond current appropriations, as the declaration of national energy emergency unfortunately self-limits,” he added.

For 2026, President Ferdinand R. Marcos, Jr. approved a P6.793-trillion national budget, 7.4% higher than the 2025 level.

Mr. Africa said that the biggest drag on growth is expected to be the central bank’s 25-basis-point (bp) rate hike.

“A serious effort to support purchasing power and avert a slowdown will need hundreds of billions of pesos in subsidies, cash assistance, and tax relief for the 21 million poorest, low-income, and lower middle-class families,” he said.

“In contrast, all the Marcos Jr. administration is doing right now is relabelling existing social assistance programs as oil crisis response, but these would have been spent anyway even if the West Asia conflict didn’t happen,” he added.

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) raised the target reverse repurchase rate by 25 bps to 4.5% at its policy meeting last week.

BSP Governor Eli M. Remolona, Jr. said the rate hike was implemented because the Monetary Board has more confidence now in government spending.

“In March, it wasn’t clear to us that the fiscal policy would start to kick in. But we are more confident now that fiscal policy will be more stimulative than before; the government will start spending more,” he said at a media briefing last week.

“I think the spending of the government slowed down because of this effort to discipline spending, and now I think they have… controls in place and they can begin to spend more,” he added.

Ateneo Center for Economic Research and Development Director Ser Percival K. Peña-Reyes said the BSP raises policy rates are designed to cool inflation by making borrowing more expensive.

“This tends to slow consumption and investment, which can drag on growth. On its own, such a move risks weakening the economy if done aggressively,” he said via Facebook Messenger.

“This is where the government steps in. By accelerating public spending on infrastructure, social programs, or government projects, the government injects demand back into the economy,” he added.

He said that the combined policy strategy is a cushion on its own and helps maintain confidence in both the economy and policy direction but warned that poorly-targeted spending could undermine the BSP’s anti-inflation efforts.

“Ideally, fiscal and monetary authorities are not working at conflicting purposes. The BSP focuses on price stability, while the government ensures growth does not stall,” he said.

“However, if fiscal policy is too expansionary, it may force the BSP to tighten even more, which might create a feedback loop,” he added.

Francisco Cid L. Terosa, an associate professor and former dean of the School of Economics of the University of Asia and the Pacific, described the accelerated spending as a “proper strategy.”

“I view it as one of the proper strategies to help emasculate the debilitating effect of inflation on business and economic activities, and consequently, economic growth,” he said.

“Although this will raise the  government deficit, it is the price we need to pay to contain the rampaging waves of economy-wide inflation, which hurts millions of the poor and unemployed,” he added.

The Bureau of the Treasury reported that National Government disbursements increased 3.2% to P1.49 trillion in the first three months.

This accounted for 23.2% of the P6.43-trillion disbursement program laid down by the Development Budget Coordination Committee in December.

This brought the National Government’s budget deficit to P355.5 billion in the first quarter, down 20.3% from a year earlier.