THE Senate Economic Planning Office (Sepo) has called for stronger structural reforms to protect fiscal sustainability, boost productivity, and improve governance as the government prepares the 2026 budget.
The recommendations were presented during the 11th Socioeconomic Research Portal for the Philippines (SERP-P) Knowledge-Sharing Forum, organized by the Philippine Institute for Development Studies (PIDS), where Sepo legislative staff officer Brian Benson See outlined policy measures to strengthen the economy’s capacity to withstand shocks and support long-term growth.
See said reform efforts should focus on reinforcing the country’s growth foundations, improving governance, and safeguarding fiscal sustainability to ensure that budget goals remain realistic and achievable.
“The path forward demands policy choices that prioritize long-term resilience, economic diversification, and fundamental improvements in governance,” See said.
Need for reform
See said that the urgency of reforms is underscored by tightening fiscal conditions that limit the government’s flexibility in allocating resources.
“This is driven by weaker revenues combined with higher disbursements. The total $6.7 trillion budget for 2026 is constrained now by tightening fiscal space. Mandatory spending now accounts for 57.7 percent,” he said.
In 2024, government revenues reached a record 16.7 percent of GDP, partly due to one-time income sources such as excess funds from government-owned and -controlled corporations (GOCCs). However, these sources are no longer available.
As economic growth slowed in 2025, revenue growth also weakened. This led the government to lower its 2026 revenue target to 16.2 percent of GDP.
At the same time, a growing share of the budget is locked into fixed obligations, including salaries, pensions, and debt service.
Debt servicing alone is expected to reach about P950 billion, or nearly 14 percent of total spending.
As a result, allocations for infrastructure, transport, and other growth-enhancing investments face increasing pressure, raising concerns about long-term growth prospects and disaster preparedness.
Strengthening growth foundations
Against this constrained fiscal backdrop, Sepo emphasized the need to strengthen the economy’s productive base to support sustainable growth.
Among SEPO’s key recommendations is the need to modernize agriculture to stabilize food prices and improve productivity, alongside the implementation of a coherent industrial policy to strengthen manufacturing and reduce overreliance on the services sector.
See noted that while the Philippine economy continues to grow, its structure remains vulnerable to external shocks due to weak domestic production and limited value addition.
“The economy currently rests on relatively stable fundamentals. Gross Domestic Product (GDP) growth is steady, inflation is easing, and unemployment rates are lower,” See said.
However, he cautioned that maintaining growth will require addressing long-standing structural constraints, including low productivity, uneven regional development, and governance challenges. PR