Balbieran: Weak infra rollout drags construction sector

Added: 2026-05-07

[00:00:00]As promised, joining us now for his economic outlook is Ronil Balberan, economist from the University of Asia and the Pacific. Good to have you with us, Ronnie.

[00:00:09]>> Good morning. Good morning.

[00:00:10]>> All right, so we have about 20 something minutes to go before the PSE releases.

[00:00:15]Why are you laughing? Um, so the Business World analyst estimate is at 3.4% for 1Q 2026. How far off is this from your own estimates? Well, I'm generally an optimistic economist. No, but at this point uh with government spending on infrastructure uh being very down uh as far as pandemic level proportions of uh negative spending -26 in third quarter and -42 in the fourth quarter and that has already affected the private construction to a singledigit growth rate in the fourth quarter. So I have really a this fear that the private construction which is 60% of the 4 trillion peso sector for the construction might actually end up closer to zero.

[00:01:06]>> So and we cannot expect that the government infrastructure will suddenly show up with double digit positive growth rate. I remember um an interview with Vince Dison sometime before the end of last year and he said that uh public spending at least with infrastructure specifically should have recovered by the first quarter of the year. Did you see that at all that recovery?

[00:01:27]>> Um well uh we have not seen anything uh substantive in terms of uh major infrastructure projects being rolled out. Now what we've seen are repairs, rehabilitation, uh upgrading of EDSA. So these are good for our economy. But on the totals in relation to the first quarter versus the first quarter last year, remember that the first quarter of last year was still at the positive government spending on infrastructure. So they it means that they need to actually disperse much much more money for the first quarter to post a positive growth versus last year. I remember seeing this post on social media that you know um is corruption really funding our economy because yes there were a lot of dispersements last year but that was before the whole flood control scandal blew up um so if we are dispersing a lot of money but it's not going to the right places I mean which scenario would be better right >> okay yeah that's another discussion but uh again we've seen this uh scenario >> in the time of corruption and we've seen this scenario in the time of too much cleanliness Remember in the toan we had actually negative 62% in infrastructure spending >> and but that was actually followed with and more than double digit 20 to 40% positive growth rate when they introduced the disbbursement acceleration program which was then actually cut by the Supreme Court declaring it partially unconstitutional.

[00:02:53]So that is a main engine that we are all looking for. No, all economies are actually looking for that particular the C plus I plus G consumers or families, >> businesses and government spending. The infrastructure is actually part of the I on the on the businesses. So government's investment on businesses which is infrastructure letter I which is around 25% of our GDP. So where will be uh that particular indicator going for the first quarter? So 10:00 that is the first indicator that I will be looking for longterm.

[00:03:33]It means we will see whether that the trajectory has been reversed from going down to actually at least uh arresting it to zero and then going up and that will have huge implication for the rest of our 2026 GDP. Okay. And um of course 2026 we saw a big shocker the Middle East oil oil crisis and that we I mean one we don't it's not really connected to us right but of course it impacted us a lot. Um what are you seeing in terms of impacts of first quarter growth? Um how how would that crisis affect our numbers? What are you going to be looking at specifically? Yes, because it it hit us on the on the last third of our so third month of our first quarter first quarter and then you have actually lower income increase through a slower GDP and then you're hit with higher prices that is not a good combination.

[00:04:33]So that's what you call uh misery index.

[00:04:36]So when you are actually faced with higher prices with lower income and that's technically called misery. So I I think that will contribute to uh to a lower GDP for the first quarter in fact.

[00:04:55]In general I think this will be closer to 3%. No. So because of what happened in March of >> So you're optimistic and yet you're thinking it must might be closer to three, right?% so we already saw inflation come out at 7.2% last month, right? We had the jobs data come out at 5% and of course um factors when we talk about possible stagflation. Do you think we are near stagflation or some sort of recession?

[00:05:24]by the strictest definition of stadflation which is negative so you you have recession and inflation recession is negative GDP for two quarters but in that sense we are we are far from hitting stagflation but if we're talking about our economy growing at 5% for over the last 70 years no and hit us for two consecutive quarters of three of 3% that is for example our Philippine definition of stagflation no so we are slowing going down to 3%. That's unimaginable.

[00:05:56]No. So, so therefore it actually is possible in that particular quote unquote revised definition of stagflation because we were supposed to be growing at 6 to 8%.

[00:06:08]>> Yeah, around 7%.

[00:06:09]>> That's the target because it's 5% is unimaginable for us and now it's 3%. So in that particular sense that as you know uh floating around 3% with higher with higher inflation and that is very very possible for 2026 if this particular condition exists. Number one, persistence of inflation due to oil prices. And then number two is the slower than expected recovery of our construction sector which has historically has pulled our economy up especially during the the last term last two years of uh Pino administration and the Duterte administration and the build build build program. So we really need that to combine with our OFW remittances, our BPOS because you know exports and imports are you know struggling right now.

[00:07:04]>> So that's our only chance.

[00:07:07]>> Okay. Well that's a little bit cloudy right there. But let's talk about um the BSP and what they have pulled. They seem to have foreseen that big uh inflation jump to 7.2%. They pulled a rate hike right before. Um have do you think the BSP has exhausted all its policy tools since they are always you know trying to manage the demand side but on the supply side me I mean what can they really really do right what tools do they have there >> I think you the the the 25 basis points is a precautionary measure no so to to really anchor to really pin down inflation expectation >> uh uh as you can remember all econom Economists are predicting a 5.5% inflation for April, but it went to 7.2.

[00:07:57]Uh so that means actually a lot of these price increases in our fuel were actually generated by our own panic, self-inflicted panic. We actually, you know, in the first weekend of March, we actually forwarded all these infographics that have no basis.

[00:08:20]Yes, >> that were not actually announced by the oil companies and we were 14 pesos, 15 pesos increase, 20 pesos and we actually bought more than what we needed during that time and it actually now cost the actual increase in oil prices and we had the fastest growing oil prices in the world.

[00:08:40]>> Yes, we did >> because in India, right?

[00:08:42]>> Yeah. Yeah. Yeah. So, so it's conclusion for me is we believe in the panic that we will run out of oil when the truth is it is far from happening because we have so much reserves and remember the problem of the world before the oil crisis was global over supply of oil.

[00:09:02]Yes, we were always talking about the oil galato, >> the oil glad. But remember before the Trump was, you know, in a bad way the the answered prayer of oil producing countries in the world because oil prices was actually diving to less than $60 per barrel. So when this thing happens and I hope this things this thing h ends as soon as possible then we can actually have a an oil price hitting no uh going down to where it was before.

[00:09:36]So 60 pesos per liter diesel so that we will have a recovery of our limited income generation because our GDP is slowing down.

[00:09:51]And at the same time that will actually generate a lot of uh economic activities because logistics cost is now lower and therefore we have more chances of hitting 5% of GDP throughout the whole year of 2026.

[00:10:06]>> Maybe too much to ask that the agri sector will recover from cheaper fertilizer problem uh prices but that's a whole other novellia of problems.

[00:10:14]Let's move on over to the national government. What policies did you want or did you hope to see them come out with oil crisis and do you think that they actually acted fast and abley?

[00:10:29]>> Yes. Uh because this is a very small temporary short-term problem that should have been addressed. No, the transportation sector is just 4% of our entire economy. That's just one trillion of the 28 trillion economy of the Philippines.

[00:10:55]Public transport drivers, bus drivers, bus companies, etc. And those cash transfers should have been released in day one in March 1, March 2, March 3.

[00:11:07]But according to our Senate briefing data, 45% in 45 days.

[00:11:14]>> Mhm.

[00:11:15]>> Dispersement rate of already existing appropriated funds.

[00:11:20]>> So how can how can we do it to ourselves? No. So the government should have acted fast. It should have dispersed. We're not even talking about exempting oil products from VAT and excise tax and then eventually we did not use that.

[00:11:35]>> Okay. So, okay. So, let's talk about what we haven't talked about touched on yet, the Philippine Po, of course, um seeing historic lows multiple times just in April alone. Um are you at all panicked that 62 is on the horizon. We were talking about the psychological barrier of 60 and now it's all of a sudden it's 62.

[00:11:57]>> Well, uh the good thing is the exchange rate are uh have three components uh three three characteristics. It's a price. No, at the same time it's a policy tool. And number three, it's an automatic stabilizer. So at 62, yes, because even before the oil crisis, our trade deficit was more than was more than 3 trillion pesos. So it should have adjusted >> to 61 62 since last year. So we have huge trade deficit and we should have actually tempered our importing activities because of that huge trade deficit. now that we are now running with higher import bill on oil >> and then this thing should be allowed to increase and uh if BSP will not allow this they will actually be wasting and burning dollar reserves by defending it to 60. So I think I'm I I'm in a way I'm I'm not worried about it and in fact I'm I'm relaxed about it. So because we can actually address that trade deficit and at the same time we will be rearranging our our behavior our preferences in terms of imports versus local local purchases.

[00:13:12]>> All right. Well, we'll see what happens at 10 a.m. when the PSA releases the first quarter growth data.

[00:13:19]>> 3.1 to 3.3.

[00:13:20]>> Okay. Let's see. Thank you so much, Ronnie Bulvveran, economist from the University of Asia and the Pacific.