Downhill forces

Even if the Iran conflict were to end today, we’re already in for hard times. The bad news is, much of the damage and hardship could last for years—and its likely depth and duration will get worse with every day and with every new bomb dropped in the raging war. In our own economy, downhill forces are already in motion that will keep unfolding because they are structural, lagged, and self-reinforcing. In other words, they’ve been there earlier; the war itself only worsened and sped them up.

What are those “downhill forces”? I could list a dozen, but I have space here to discuss only three. The first is tight government finances. That is, the government simply doesn’t have the money to fund everything it must spend on. And these expenses are mounting, because much of that spending is urgently needed now. These include emergency subsidies, direct government purchases of vital commodities like oil and food to secure our supplies, and investment in facilities we could have put in place years ago, like storage capacity for strategic petroleum reserves, and more. And compounded by rising prices projected to surge faster across the board, the needed spending grows every day.

The government is in a multiple squeeze. As its spending needs surge, its revenues are lagging, because the drastic economic slowdown and the massive corruption scandal triggered last year have left it with less to tax. And flood control was just the tip of the iceberg, we’re told, even as a resolution remains nowhere in sight (and, sadly, it’s now all but lost in people’s minds). It’s not unlikely, then, that siphoning off tens, maybe hundreds, of billions of our hard-earned tax pesos continues. It should be provoking even more intense public indignation, yet we hardly feel any of that now. As always, it has been overshadowed by other news, this time on the coming hardships brought by the Iran war. Meanwhile, there are three things you can bet on: one, the government will bring us into even deeper debt than the record P18.13 trillion it has already accumulated. Two, the cost of servicing that debt will rise because interest rates will again head north. Three, the government will have no choice but to hit us, sooner or later, with more and higher taxes, right when the loud clamor is to cut them to ease people’s pain. If you think ending the Iran war today will change that scenario, dream on.

The second downhill force is accelerating inflation. In plain English, prices will rise faster again. We’ve already been seeing it pick up since November. And the forces causing it and worsening it again come from multiple directions, the foremost being the dramatic rise in petroleum costs. Also, the falling peso makes imports pricier—from oil to cement, rice, coffee, noodles, consumer goods, and many more—even if prices where they come from don’t move (but they will!). The food we produce will get costlier with more expensive chemical fertilizers (which come from petroleum) and hiked transport and logistics costs. Wage pressures will raise labor costs and risk a wage-price spiral. Profiteering traders will rub even more salt in our wounds. Top all of that with more taxes that have nowhere to go but up; the only question is when. The inflation train is out of the station, and it’s picking up speed down the track.

The third downhill force is declining and deteriorating jobs, with the threat of tens of thousands of returning overseas workers adding to those who will compete for them. It’s declining, with December 2025 labor force data showing a net aggregate loss of 758,000 jobs in the domestic economy since December 2024. It’s deteriorating because the same statistics tell us that the biggest segment (about half) of unemployed Filipinos now are those with a college education. That means the jobs out there are lower-level ones. Job losses were actually much worse for industry and agriculture, which together counted 1.25 million fewer jobs (822,000 and 424,000, respectively), partly offset by 488,000 new jobs in services. But that’s little consolation, as a major part of those services sector jobs are actually of the informal, “underground” economy kind—think of padyak and tricycle drivers, fish ball vendors, and the so-called “mangangalakal,” or people who scavenge recyclables from garbage heaps to sell.

There’s more I could list but don’t have space to elaborate: a continuing slowdown in fixed investments, falling public construction even in the face of inferior infrastructure, worsening energy insecurity and impending energy rationing, further peso depreciation, weak and weakening capital markets, upward pressure on interest rates, technological disruption, eroding household incomes, simmering tensions from widening inequalities, and more. While my article last week tried to strike a hopeful note, the reality check says that for now, we must brace for worse than the pandemic brought about.

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