Sona 2026: What Filipinos need to hear (1)

President Ferdinand Marcos Jr. will deliver his fifth State of the Nation Address (Sona) on July 27. This upcoming address is widely anticipated for two reasons.

First, it is a follow-up to his surprising “mahiya naman kayo” remark last year which triggered investigations into the multibillion peso flood control corruption scandal.

Second, the Philippines is facing mounting economic pressures despite attaining upper-middle-income status. Poor public infrastructure spending and low consumer confidence are dragging down economic growth, further worsened by high prices of oil and food due to the Middle East War.

The Filipino people are understandably frustrated. Based on the 2Q2026 Social Weather Stations survey, only 38 percent of adult Filipinos are satisfied with the President’s performance, while 45 percent are dissatisfied.

As the Sona approaches, we are providing some thoughts and suggestions for the administration to consider. The first part focuses on the current situation that the President should address.

• Sluggish economic growth. The Philippine economy grew by only 4.4 percent in 2025, as government infrastructure spending contracted in the second half due to the flood control scandal.

Excluding the pandemic, this is the slowest annual economic growth since the 3.9 percent in 2011. It also marks the third straight year the administration missed its own growth target.

Reduced infrastructure investment and the large increase in oil prices worsened the slowdown. During the period, the agriculture and industry sectors contracted by 0.2 percent and 0.1 percent in the period, respectively.

• From stable to soaring inflation. Inflation was at a manageable 1.7 percent in 2025. But prices began to rise in 2026 due to the United States-Iran war. Inflation reached 6.4 percent in June 2026, bringing the average inflation of the year to 4.8 percent.

Prices of basic food commodities remain elevated. These price increases have a large effect on ordinary Filipino families as they spend about 70 percent of their budget on food, electricity, and transport.

• Slow fiscal consolidation. Allegations of corruption and abuse of the national budget undermined the medium-term fiscal framework. The national government’s outstanding debt to gross domestic product (GDP) ratio reached 65.2 percent in 1Q2026, higher than 63.2 percent recorded as of end-2025.

In the original plan, the debt level should have gone below 60 percent of the economy in 2025. With total outstanding debt reaching P18.6 trillion in May 2026, each Filipino now has a debt of P165,000, a significant increase from P115,000 in June 2022.

Higher debt level also means larger interest payments which reduce the resources for priority sectors such as education and health care. In 2026, P950 billion or roughly 14 percent of the total budget is allocated for interest payments alone.

The national government’s fiscal deficit continues to narrow but at a slower pace than envisioned. In 2025, the budget deficit reached P1.58 trillion, equivalent to 5.6 percent of the GDP, as expenditures continue to outpace revenue collections.

• Corruption and slow accountability. The Philippines ranked 120th out of 182 countries in the 2025 Corruption Perception Index. Some contractors and public works officials involved in the flood control scandal have been arrested. However, justice against high-ranking elected officials has been slow.

On stolen public funds, only P841 million flood control mess has been recovered by the national government as of June. This is just a fraction of the P119 billion annual economic losses estimated by the Department of Finance.

• Weak foreign direct investments (FDI). FDI net inflows declined by 17 percent to USD 7.8 billion in 2025 from USD 9.4 billion in 2024. This is equivalent to 1.6 percent of GDP, missing the target of 2 percent to 5 percent under the Philippine Development Plan. FDIs are important because they can generate jobs and facilitate transfer of skills and technology to local businesses.

• Struggling tourism sector. Foreign tourist arrivals reached 5.9 million in 2025, roughly the same as it was in 2024. For both years, however, the figures fell short of the target set by the Department of Tourism at 8.4 million in 2025 and 7.7 million in 2024.

The Philippines trailed behind its peers last year: Malaysia (42 million visitors), Thailand (32.9 million), Vietnam (21.2 million), Indonesia (15.4 million).

Tourism can drive economic growth by supporting small businesses in rural areas and serving as a source of foreign exchange, which can help protect the economy against external shocks.

• Malnutrition among children. Underweight prevalence among children under 5 years old rose to 16.2 percent in 2025 from 15.1 percent in 2023.

Meanwhile, stunting prevalence among children under 5 years old increased to 25.3 percent in 2025, from 23.6 percent in 2023. Stunting is associated with children who are shorter than their age because of poor nutrition.

Malnutrition severely affects the mental and physical development of a child.

Part 2 contains our policy recommendations for the Marcos administration.

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Gary B. Teves is a Filipino politician and public servant who served as secretary of the Department of Finance.