THE Philippine economy remains on a steady growth path despite rising global oil prices, with economist Professor Ronilo Balbieran saying the country should be more concerned about weak infrastructure spending than fuel cost spikes.
Speaking at a recent economic forum, Balbieran said the Philippines can still grow at a “respectable pace,” noting that last year’s 4.4 percent gross domestic product expansion — while below government targets — remains strong relative to global peers.
“In relation to the world, 4.4 percent is still high,” he said, citing slower growth in advanced economies such as the United States and Europe. However, he emphasized that the figure falls short of the country’s potential of six percent to eight percent growth.
Oil price shocks seen as temporary
Balbieran downplayed fears that rising oil prices would derail economic growth, describing the situation as a short-term and self-correcting challenge driven by market forces.
He explained that under the law of supply and demand, higher oil prices eventually incentivize producers to increase output, while consumers adjust by reducing consumption or shifting to alternatives such as electric vehicles.
“This is a temporary problem,” he said, adding that global oil shocks in the past — even more severe ones — did not necessarily push the Philippine economy into contraction.
He noted 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. At present, oil dependence has dropped to around 30–35 percent, with renewables and other energy sources providing buffers.
External position remains strong
Balbieran also pointed to the country’s strong dollar reserves and steady inflows — including remittances and foreign earnings — as key factors that help cushion external shocks.
The Philippines 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.
Bigger concern: infrastructure slowdown
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, dragging overall gross domestic product growth down.
“If there’s something we should be more afraid of, it’s infrastructure spending not recovering,” he said.
According to him, 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 hinges on spending recovery
Balbieran said 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 the 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.
Not all bad news
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 said. “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 said. “But to grow faster, we need to fix what we can control.” / KOC