Philippine Economy Maintains Steady Growth Amid Global Oil Price Volatility
Despite rising global oil prices, the Philippine economy continues on a steady growth trajectory, according to economist Professor Ronilo Balbieran. Speaking at a recent economic forum, Balbieran emphasized that the country should be more concerned about weak infrastructure spending than temporary fuel cost spikes, as this poses a greater threat to long-term economic expansion.
Resilient Growth Amid Global Challenges
Balbieran noted that the Philippines achieved a 4.4 percent gross domestic product (GDP) expansion last year, which, while below government targets, remains strong compared to global peers. "In relation to the world, 4.4 percent is still high," he said, citing slower growth in advanced economies like the United States and Europe. However, he stressed that this figure falls short of the country's potential of six to eight percent growth, indicating room for improvement.
Oil Price Shocks Viewed as Temporary
Downplaying fears that rising oil prices could derail economic growth, Balbieran described the situation as a short-term, self-correcting challenge driven by market forces. He explained that higher oil prices incentivize producers to increase output and encourage consumers to reduce consumption or shift to alternatives such as electric vehicles. "This is a temporary problem," he added, noting that past global oil shocks, even more severe ones, did not necessarily push the Philippine economy into contraction.
Balbieran highlighted that today's economy is less vulnerable to oil shocks compared to the 1970s, when oil accounted for about 70 percent of the country's energy mix. Currently, oil dependence has dropped to around 30–35 percent, with renewables and other energy sources providing buffers against volatility.
Strong External Position Cushions Shocks
The economist also pointed to the Philippines' strong dollar reserves and steady inflows, including remittances and foreign earnings, as key factors that help cushion external shocks. The country currently holds reserves equivalent to several months of imports, well above the critical threshold that typically signals vulnerability to crisis. "These buffers allow us to absorb price increases, including oil," he said, underscoring the economy's resilience.
Infrastructure Spending Decline Poses Major Threat
Despite these strengths, Balbieran warned that the real threat to economic growth lies in declining government infrastructure spending. He noted that public construction activity sharply contracted in recent quarters, including a steep drop of over 40 percent in the fourth quarter, which dragged overall GDP growth down. "If there's something we should be more afraid of, it's infrastructure spending not recovering," he cautioned.
According to Balbieran, infrastructure has a multiplier effect across the economy, stimulating private sector investment, job creation, and consumption. Weak government spending, in contrast, dampens broader economic activity. He added that had infrastructure spending merely stayed flat instead of contracting, economic growth could have reached around six percent, closer to the government's target.
Growth Outlook Depends on Spending Recovery
Balbieran stated that the Philippines can still achieve stronger growth in the coming quarters, but this will depend heavily on the government's ability to accelerate project implementation and disbursements. He stressed that timely procurement, awarding, and payment of infrastructure projects are critical to restoring economic momentum. "If we see a pickup in infrastructure spending, then we can be more confident about hitting higher growth," he said.
Opportunities Amid Challenges
The economist also highlighted that rising oil prices could create opportunities in other sectors, including electric vehicles, renewable energy, and energy-efficient logistics. "This is not all bad news," he remarked. "Some sectors will benefit and adapt." Balbieran maintained that the Philippine economy remains fundamentally resilient, supported by strong domestic demand, a young population, and improving policy reforms.
However, he cautioned that without a rebound in infrastructure spending, growth could remain below potential—even if oil prices stabilize. "The economy is okay," he concluded. "But to grow faster, we need to fix what we can control."
