The year 2026 is shaping up to be one of those periods where the country moves, but not very fast. The latest report from the Bangko Sentral ng Pilipinas (BSP) shows an economy that is stable yet still struggling to regain its full strength. Investment remains weak, public spending has slowed, and the output gap is expected to stay negative throughout the year. In simple terms, we are still operating below our potential.
However, the BSP report also gives us an outlook where inflationary pressures are expected to remain contained in 2026. The negative output gap and weak demand limit the ability of businesses to raise prices, and the central bank notes that real household incomes are improving. This means most Filipinos will not face the kind of price surges experienced in 2022 and 2023. Even with this more stable inflation outlook, 2026 will still be a challenging year for the masses because income growth is slow, job opportunities are limited, and the expanded VAT quietly raises the cost of many everyday services.
For the working class, the year may feel heavy. Job creation is expected to be slow, and businesses are cautious about expanding. The BSP describes this as labor slack, which means more people looking for work than there are opportunities available. This could mean fewer hours, delayed hiring, and more competition for the same roles. It is the kind of environment where people work hard but still feel like they are barely keeping up.
The middle class will feel the pressure in a different way. Salary increases may be modest, promotions may take longer, and career growth may not be as fast as expected. On top of that, the expanded VAT on digital services and online platforms will quietly raise monthly expenses. Even if inflation stays low, the tax changes will make many everyday transactions slightly more expensive.
So the lived experience of 2026 may feel like: “Hindi naman bumabagsak… pero hindi rin umaangat.” It is a year where families adjust budgets, delay big purchases, and focus on essentials. It is also a year where people feel like they are standing still, even if the economy is technically improving.
The BSP expects a stronger recovery by 2027. Investments may pick up, public spending could normalize, and the effects of lower interest rates will start to show. That is why 2026 feels like a transition year. We are not yet in the recovery phase, but we are moving toward it.
This is where government action becomes crucial. If 2026 is a transition year, then it should also be a preparation year. The country cannot afford to wait for 2027 without doing the groundwork now. Let me cite some suggestions: the first step is to restore confidence in public spending. Infrastructure projects that were delayed or scaled down need clear timelines and transparent implementation. These projects create jobs, stimulate demand, and send a signal to investors that the government is serious about growth.
The second step is to support small and medium enterprises that will, among others, generate more jobs. These are the businesses that hire the most people, yet they are also the most vulnerable during periods of weak investment. Access to credit, simplified compliance, and targeted assistance can help them stay afloat and eventually expand.
The third step is to cushion the impact of the expanded value added tax (VAT). If the government is set on broadening the tax base, then it must also strengthen social protection. This means improving cash transfer programs, supporting public transportation, and ensuring that basic goods remain affordable. Tax policy should not outpace the ability of households to cope.
Looking at the months ahead, the question is not whether 2026 will be a good year. It is whether we can make it less difficult for the majority of the Filipinos. The BSP has already given the outlook. The numbers are clear. What happens next depends on how our government responds. A transition year can either be a pause or a preparation. The choice is in the hands of those who lead.
I can only hope the New Year brings some relief to a country that has been carrying far too many burdens for far too long.
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