POSITIVE economic news has been in short supply in the Philippines this year, and by now everyone is aware of indicators such as slowing gross domestic product (GDP) growth — 2.3 percent for the second quarter of 2026, the slowest expansion since the Covid-19 pandemic — and significantly higher inflation, which reached 7.2 percent in September. Even if the GDP indicator is only understood in the general sense of “higher number good, lower number bad,” everyone keenly understands on a personal level that the economy is struggling when they find themselves at the gas pump, or the grocery store checkout line, or scratching their heads wondering how to pay each month’s progressively higher electric bill.
Nevertheless, we are assured by those who do the economic thinking for the country that these circumstances are temporary, and the approaching new year is sure to bring a rebound to more benign conditions. However, there are two indicators, ones that do not receive a great deal of public attention, that suggest our economic doldrums may last much longer than anyone anticipates.
The first indicator is remittances. Obviously, this is one familiar to most people to some extent, as remittances are an important component of our economy, accounting for between 8 and 9 percent of GDP and almost 10 percent of the country’s final household consumption expenditure. Remittances are generally considered a resilient driver of household spending, providing the economy with diversification in sources of income and serving as a stabilizing factor against weakness in domestic labor market conditions.
Even though remittances this year would probably end the year higher than in 2025, a recent analysis by Oxford Economics revealed that the Philippines is likely the most vulnerable to external pressures. First of all, the instability in the Middle East has hit remittances harder than most realize; that region is a source of just under 19 percent of total remittances, and with the region in shambles, year-on-year growth in remittances for the Philippines has dropped over the past three months from a steady 3-percent annual rate to about 1.9 percent. That is still positive, but the decline comes at a time of much higher inflation, which aggravates the downturn. In a “normal” year, the average 3-percent growth rate of remittances closely matches or even exceeds the monthly inflation rate, meaning that remittance-receiving families can get ahead, or at least maintain their standards of living.
Bangko Sentral ng Pilipinas (BSP) data shows a disturbing shift for these families now. In the BSP’s quarterly consumer expectations surveys in 2025, 96.4 percent of recipient households used remittances for food and other household needs, 60-70 percent spent them on education and healthcare, and nearly 40 percent saved some of the money. However, the Q3 report for this year shows that the share of households spending remittances on food increased to over 98 percent, while the shares allocated to healthcare, education and saving have fallen sharply from their pre-war levels.
The second concerning indicator is the Logistics Growth Index (LGI), an indicator tracked monthly across several dozen logistics-heavy economies — the Philippines, being an archipelago, is one of them — by the World Research Institute (WRI). In September, the Philippines’ LGI fell to 47.3, a decline of 3.0 points from the previous month. Similar to other indexes, a number above 50 indicates growth, while below 50 indicates contraction. The September LGI was far below the global average of 51.6, and was the worst of 16 economies tracked in Asia by WRI.
According to WRI analysts, the “decline was primarily driven by a drop in business volume, deteriorating transportation conditions and softening goods for sale, reflecting severe port disruptions and a consumer shift toward essentials amid accelerating inflation and currency depreciation.” Simply put, people are not buying as much, what they are buying tends to be essential commodities that are generally lower in cost than goods bought through discretionary spending, and moving goods around has become more costly and difficult due to the war in the Middle East and other global conditions.
Neither of these situations — the remittance downturn and the downturn in economic momentum encompassed by the LGI — is going to right itself quickly. It has taken six months for the full impact of the war in the Middle East to be felt in the economy here, and once it ends — which it is not showing signs of doing anytime soon — it is going to take a corresponding length of time for conditions to return to normal. And that does not even take into account less predictable risk factors, such as the potential impacts of the El Niño; or the implications other geopolitical uncertainties such as our deteriorating relations with China, unrest that is apparently rapidly spreading across Europe this week, or what the results of key upcoming elections in countries such as the US, Brazil and France will mean for the global environment.
