Winter, waves and the return of the unresolved
Economic cycles do not end because we are tired of them. They end because excess has been worked off, and capital is ready to be productive again.
For much of the past decade, the Philippine economy has been praised for its resilience, consumption power and relative insulation from global shocks. Yet resilience should not be confused with immunity. Quietly, beneath the surface, familiar patterns are reemerging—patterns that economic history has documented repeatedly.
One way to understand this moment is through the Kondratieff Cycle (40 to 60 years), a long‑term economic cycle framework suggesting that economies move through multidecade phases of expansion and contraction.
This was first proposed by Russian economist Nikolai Kondratieff in 1925. Driven by technological innovations, the cycle includes phases of expansion (spring), maturity (summer), stagflation (autumn) and recession/depression (winter).
These cycles do not describe quarterly fluctuations. They describe regimes.
A long cycle, a familiar story
After World War II, the Philippines experienced its spring—reconstruction, institutional rebuilding and demographic momentum.
The summer phase followed in the 1970s, marked by aggressive expansion financed increasingly by debt.
When external conditions tightened, winter arrived in the 1980s in the form of a balance‑of‑payments crisis and political upheaval.
The reforms and liberalization of the 1990s ushered in a new spring that matured into a long autumn lasting nearly three decades. This was an era of steady growth, rising asset prices and deepening financial markets.
It was also an era where leverage quietly replaced productivity as a key driver of returns. That substitution matters now.
When markets stop believing the story
Markets rarely wait for official confirmation.
The Philippine Stock Exchange Index (PSEi) has spent years consolidating rather than compounding. Valuations have compressed even as earnings recovered from the pandemic. Rallies are shorter, leadership narrower and patience thinner.
The peso tells the same story. Each bout of depreciation is treated as temporary, yet each recovery is shallower than the last.
This is not panic behavior. It is repricing behavior—capital demanding higher compensation for risk in a late‑cycle environment.
Technical analysts might describe this through Elliott Wave Principle, which frames markets as expressions of investor psychology.
Whether one views Elliott Waves as science or art, the underlying insight holds: Optimism expands in impulses; realism asserts itself in corrections. The Philippine equity and currency markets are behaving exactly as economies do when they transition from autumn to winter.
The cancer returns—because it was never fully removed
In my earlier piece here (The cancer returns: Rizal’s warning, floodgate reckoning, Oct. 5, 2025), this phase was described as “the cancer returning”—not suddenly, not dramatically— because underlying vulnerabilities were treated as manageable rather than curable.
Corporate leverage illustrates this clearly. Debt levels today, relative to market capitalization, are materially higher than during past crises. This does not imply imminent failure.
It explains why capital has become cautious, why returns feel harder to earn, and why volatility feels more persistent.
Winter exposes what autumn conceals.
But winter is not the enemy
The greatest mistake policymakers can make is to treat winter as failure.
In reality, winter is a necessary passage. It forces discipline. It reallocates capital. It rewards productivity over financial engineering.
Attempts to deny winter—through artificial stimulus, asset support, or narrative optimism—do not prevent adjustment. They only delay it and raise the eventual cost. This is where babagsak muna bago babangon muli (it will fall but rise again) matters.
It is not defeatist language. It is historically accurate language. Growth slows before it strengthens. Excess unwinds before innovation returns.
From diagnosis to discipline: A resilience Marshall Plan
Recognizing winter is not enough. The opportunity lies in responding to it correctly.
This calls for a reframed Philippine Marshall Plan—not for rebuilding ruins, but for building resilience in real time.
At the national level, the task is stabilization, not bravado. Protect purchasing power. Anchor expectations. Maintain fiscal discipline. Crowd in private capital through credibility, not inducements.
In winter, confidence is the most valuable public good.
At the local government unit (LGU) level, execution matters more than policy design. This is where diskarteng wais (smart strategy) becomes economic infrastructure—local food systems, energy efficiency, faster permits, smarter procurement.
LGUs are no longer administrators; they are shock absorbers.
At the household level, macroeconomics finally becomes personal. Household‑to‑enterprise shift is not theory—it is lived reality.
Alkansya (coin bank) thinking—saving, managing debt, upskilling, adapting—is how families survive winter without waiting for spring. This is not austerity by decree. It is resilience by design.
The choice ahead
The Philippines had navigated economic winters before—and emerged stronger when the country respected the logic instead of resisting it.
Today’s challenge is neither collapse, nor crisis, but transition. Markets have already adjusted their expectations. Capital has repriced risk.
The question is whether policy, institutions and behavior will adjust with the same realism. Because winter does not destroy economies. Denial does. And spring only arrives—quietly, gradually—when winter has been allowed to do its work. —Contributed INQ
(The author is one of the Philippines’ most respected analysts and market strategists. He is a senior adviser at Reyes Tacandong & Co. and an independent director at PH Resorts Group Holdings Inc. and DITO CME. For over 20 years, he was chief market strategist at BDO Unibank. A certified technical analyst, he combines data-driven precision with strategic foresight, making him a trusted voice in Southeast Asia and global economic fora.)
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