Downturn
We are technically not in a recession. Not yet. But everyone now seems to be feeling it.
All businesses are feeling the downturn. After the full impact of last month’s fuel price increases, Filipino consumers are reallocating their spending to cope with inflationary conditions. Businesses that depend on discretionary spending will feel the impact first.
Sunlife Philippines country head JJ Moreno reports on the results of his company’s recent survey. About two-thirds (64 percent) of surveyed families are reducing their spending on nonessential items. About 30 percent of families are cutting back on even basic necessities. For an economy that is driven by household consumption, these are disturbing signals.
The country’s largest beer maker is observing something that is unprecedented. It used to be that during the good times, sales of beer boomed while gin sales remained flat. During bad times, gin sales boomed while beer sales remained flat. Today, both beer and gin sales are declining at the same time. This has to be the proverbial canary in the coal mine.
High fuel prices force consumers to divert spending from other goods. Our businesses depend on sustained demand for those other goods. Should high fuel prices continue, our domestic economy enters into what will seem like recessionary conditions.
Our economic managers are reportedly reassessing the assumptions of the proposed 2027 national budget. Should our enterprises experience even tougher challenges, government’s revenue collections will decline. As things stand, well over a third of public spending is funded by borrowing. We will probably need to borrow even more – and even if the space to do so has tightened.
No one is expecting the inflation rate to slow down in the foreseeable future. No one is expecting domestic economic growth to improve dramatically. The conditions do not allow that.
Two multilateral finance institutions have downgraded their growth forecasts for the Philippine economy to about 3.3 percent this year. We might not even achieve that lower forecast.
In the second quarter of this year, our growth rate plunged to 2.3 percent. The third quarter numbers are not going to be much better. For the first three quarters of the year, our GDP growth is well under three percent.
The sluggish growth reflects in higher unemployment levels. A large number of people without jobs will not pull up consumer demand. Lackluster domestic demand will put pressure on our enterprises. Some will cope by laying off workers. Others will simply shut down.
We are in one of those periods where economic statesmanship needs to be truly heroic. But this government is unable to deliver even a semblance of the economic statesmanship we need.
We mentioned in this space the controversy over the incomplete Mahayhay-Tuburan road project in Surigao del Norte. The ombudsman had announced it is investigating the case, naming Surigao del Norte Rep. Francisco “Lalo” Matugas and his son former congressman Francisco “Bingo” Matugas II as persons of interest.
The ombudsman’s investigation into yet another failed public works project is a hot topic in northeastern Mindanao where the Matugas political family is prominent. Every development in this unfolding case is a conversation piece in the area.
A few days ago, Rep. “Lalo” Matugas filed his counter-affidavit with the ombudsman’s preliminary investigation team building the case. The prosecutors have produced a real estate mortgage executed by Lalo to support a loan benefitting Boometrix, the company contracted to build the road in question.
In his counter-affidavit, Lalo admitted he mortgaged family property to secure a loan obtained by his son Bingo and Boometrix. He described himself as a third-party mortgagor to support a working capital loan obtained by his son. However, the mortgage does not give him a role in the management of the construction firm. Nor does the loan documents mention the questioned road project at all. Lalo denies receiving any proceeds from the road project.
The chronology is vital. Lalo was not a public official when he executed the mortgage on May 1, 2025. His earlier term expired June 30, 2022 and he returned to public office as a congressman on July 1, 2025.
This chronology is important because the ombudsman’s complaint states that the last payment for the road project was made March 24, 2024. That is about a year before the mortgage was executed. Therefore, the bank financing acquired on the security provided by the mortgage could not have related to the road project.
A mortgage to help secure a loan is a normal thing in private transactions. No wrongdoing may be attributed to this transaction by itself. Lalo could not be implicated in a fully paid but incomplete road project because he mortgaged his property to support a company well after the life of the contract.
The ombudsman must do better work to link the elder Matugas to a questionable project. The existence of the mortgage does not, by itself, link Lalo to the project. There is no document that shows Lalo received any proceeds from the road project. Nor is there any document that established that the bank financing facilitated by the mortgage played a role in an already concluded contract awarded to Boometrix.
It is easy to suspect that a political family dominant over a certain locality is naturally involved in any dubious contract that comes along. But the proof must be stronger than mere suspicion.
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