A grim word is beginning to circulate in discussions of the Philippine economy: stagflation. Strictly speaking, the country is not there yet. Growth has slowed sharply and inflation remains uncomfortable, but unemployment is not exceptionally high and output continues to expand. A better description is less dramatic but still worrying: the Philippines is passing through a “stagflation-lite” moment.

Classic stagflation combines three ills at once: high inflation, weak or negative real growth, and high unemployment. The Philippine version is milder. Inflation has pinched households, growth has lost momentum, and investment has faltered, but the labor market has not collapsed. That distinction matters. Misdiagnosing the illness risks prescribing the wrong cure.

Under President Ferdinand Marcos Jr., the economy started with enviable speed before slowing to a crawl. Real gross domestic product (GDP) grew by 7.6 percent in 2022, his first year in office. By the first half of 2026, growth had eased to 2.6 percent, following a 2.8 percent expansion in the first quarter and 2.3 percent in the second. Inflation, meanwhile, has remained elevated, while unemployment has stayed comparatively contained. This is not the economic misery of the 1970s, but nor is it a picture of robust, confidence-building expansion.

There is still time to alter the trajectory, but not much. President Marcos has less than two years before leaving office on June 30, 2028. His administration can still finish with credibility, but only if it abandons business as usual. The task is not merely to announce programs, but to restore confidence among households, firms, investors, local governments, Congress, and the Bangko Sentral ng Pilipinas.

Some headwinds are beyond Malacañang’s control.

Geopolitical shocks and supply disruptions can lift oil, fertilizer, and food prices, feeding quickly into domestic transport and agricultural costs. A weaker world economy weighs heavily on exports, remittances, and foreign direct investment. Furthermore, climate and disaster risks like typhoons, floods, El Niño, and earthquakes regularly impose heavy costs on infrastructure, farms, and overall growth.

Up to a point, the central bank can help, but only within its mandate. It should keep inflation expectations anchored and adjust policy rates when persistent price pressures threaten to become entrenched. It must also preserve a sound financial system so banks can continue lending to businesses and households at reasonable rates.

However, the heavier burden rests squarely with the executive branch. First, the administration must repair the budget. The upcoming national budgets should be redirected toward projects with high economic and social returns. The country’s infrastructure gap remains massive, and past corruption in flood control and public works is an argument for cleaning procurement and funding a transparent, technically sound pipeline, not for abandoning investment entirely.

Second, President Marcos should practice fiscal restraint. With debt service rising and revenue vulnerable to slower growth, every peso must withstand public scrutiny, aligning with the promise that public money be managed with integrity, transparency, and accountability.

Third, the administration must reduce implementation risk. Good plans often fail in the hands of weak agencies, timid managers, or politicians intent on recycling appropriations for pet projects. The president must ensure priority programs are funded, protected, and executed consistently across agencies over time.

The Philippines does not face full-blown stagflation, but that is no reason for complacency. A stagflation-lite moment can still erode living standards, discourage investment, and weaken public trust if officials treat it as a passing inconvenience. The remedy is not panic, but discipline: credible budgets, cleaner execution, targeted infrastructure, and a central bank left to do its job. Growth can recover; confidence, once squandered, is far harder to rebuild.