Perceptions/prescriptions on a slowing economy

The Philippine economy (GDP) in the second quarter of 2026 grew by 2.3%, which is quite low compared to previous quarters of prior years. While recovery and faster economic growth is achievable in the third and fourth quarters of this year, at best we are looking at a 4% GDP growth for the full year, with the Iran war winding down and the fuel oil prices decreasing/stabilizing. The higher government expenditures on infrastructure, bigger assistance to disaster and calamity victims, and the expected Christmas season spending will add to the consumption component of the economy in the rest of the year. The two major causes of the slowdown of the Philippine economy were the Iran war and the DPWH corruption scandal. On top of the higher fuel oil prices that ballooned logistics costs, the global financial/investment environment contracted, starving investments to developing countries, especially to oil-dependent economies like the Philippines. The DPWH scandal siphoned money to the corrupt senators, congressmen, government officials and contractors, that would have flowed to investments and consumption expenditures. Money from corruption is mostly stashed abroad or hidden (undeposited), and doesn't generate a multiplier effect on the economy. Then, the government delayed/froze payments to all government contractors during the investigations, which further constricted the volume and velocity of money supply, diminishing the investment and consumption component of the GDP even more. Some friends asked why the malls are still full of people if the economy is already slowing down. I observed and also checked with the merchants, and while the shoppers are in the malls for the ambiance and convenience, they are mostly buying food, groceries, and basic necessities. Apparel, personal effects, and appliances have lower sales. Tourists have also reduced, decreasing tourist purchases, with hotels and tourist places declining in revenues. This is significant considering tourism contributes 9% of our GDP. The banking and finance industry are stable but lending interest rates have gone up, and the banks credit standards are stricter. The past due loans in some sectors, especially in construction are also higher. However, consumer loans are growing as more Filipinos are borrowing for their personal consumption. It's a consolation that the level of household debt in the Philippines relative to GDP is lower compared to other developing countries. The investment component of the Philippines GDP is the one badly in need, as foreign and domestic investments in plant expansion and new facilities have substantially reduced. The end of the Iran war may revive the investment appetite of domestic and foreign investors, but we have to improve the country's investment climate, while growing again the domestic market in the country. The Philippine government is on the right track in ramping up infrastructure spending in the rest of the year 2026 and in 2027, and in the realistic peso-dollar exchange rate. It's also in the right track in reducing taxes and increasing subsidies/assistance to the lower classes to increase their purchasing power. The higher exchange rate translates to more pesos from exports, the remittances of the OFWs, the BPO earnings, and tourist receipts which, when added to the government expenditures, will prevent the economy from stalling or growing slower. It's probable the Philippine economy will grow at the 5% to 6% level in 2027 and 2028. The government can still do a lot in the business environment by logistical improvements, faster permitting/licensing especially in the local governments, and in the ease of doing business. It would also help a lot if an acceptable political stability is achieved and perceived by local/foreign investors, if the corrupt senators, congressmen, government officials and contractors are in jail, and the impeachment trial concluded with a just verdict believed and accepted by majority of Filipinos.