Both President Marcos and Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona have expressed confidence that the Philippine economy will regain stronger momentum by 2026.

Their message of optimism comes at a time when the nation is grappling with an intricate web of economic stresses: persistent inflationary pressures, unsettled investor confidence, global uncertainty, and a drag on public spending linked to the ongoing flood-control corruption investigations.

The question is not whether the Philippines can rebound; history shows that it can. It is whether the policy and governance environment will allow this rebound to materialize at the speed and scale the nation needs.

To its credit, the Philippines retains key fundamentals that support a medium-term recovery. Remittances remain resilient, the labor market is expanding, and the country’s demographic dividend continues to provide a strong base for consumption.

Yet consumption cannot propel growth indefinitely, especially if households remain squeezed by higher prices for food, utilities, and transport. The policy challenge is to ensure that inflation is decisively tamed while supporting demand and restoring confidence in the government’s capacity to spend effectively and honestly.

Fiscal policy holds the lion’s share of responsibility for achieving growth in 2025 and enabling the stronger upturn projected for 2026. The government must first address the credibility gap triggered by the flood-control procurement scandal. Public works and infrastructure spending, that are both critical drivers of GDP, cannot stall for long without weakening the whole economy.

The solution is not simply faster spending. It is cleaner, more transparent and more accountable spending. Restoring trust in the procurement system through digitalization, real-time disclosure, and third-party oversight are all essential elements in projecting trustworthy governance.

At the same time, fiscal priorities must be sharpened. The administration should accelerate high-multiplier capital outlays in transportation, logistics, broadband, and disaster-resilient infrastructure. Equally important is protecting allocations for agriculture, which has shown surprising strength but still suffers from chronic underinvestment.

Targeted subsidies—especially for transport and food—will help soften inflation’s impact on low-income households, but these must be time-bound and anchored on clear exit strategies.

On the monetary policy side, the BSP faces a delicate balancing act. Governor Remolona’s cautious stance on easing, by waiting for inflation to steadily remain within target, signals prudence. Premature rate cuts may reignite price pressures, but excessive tightening will throttle borrowing, investment, and expansion of small and medium enterprises.

A gradual, data-driven sequence of rate reductions starting in 2025, combined with enhanced liquidity support facilities for the banking sector, sought to position the financial environment for stronger private-sector activity by 2026. At the same time, the BSP must continue strengthening foreign-exchange buffers and prudential safeguards to shield the country from external shocks.

However, even the best fiscal and monetary tools will fall short without governance reform. A credible rebound requires a renewed commitment to regulatory coherence, predictable rules, and swift action against corruption. Investors—both domestic and foreign—need reassurance that contracts will be honored, bidding processes are clean, and policy directions are stable. The Philippines cannot hope to out-compete its ASEAN peers if uncertainty is the norm.

Achieving higher growth demands discipline, transparency, and political will. If government leaders match their optimism with resolute action—cleaning up procurement, investing wisely, protecting households, and ensuring monetary stability—the projected rebound can become a reality.