The Senate Economic Planning Office called for urgent structural reforms to safeguard fiscal sustainability and boost productivity as the Philippine government prepares a P6.7 trillion budget for 2026 amid tightening financial constraints.
Senate Economic Planning Office (SEPO) legislative staff officer Brian Benson See said during a forum organized by the Philippine Institute for Development Studies (PIDS) that the government should reinforce growth foundations and improve governance to ensure budget goals remain achievable.
He said the 2026 fiscal plan faces limited flexibility because mandatory spending now accounts for 57.7 percent of the total.
The urgency for reform follows a decline in revenue projections. While government revenues reached 16.7 percent of gross domestic product in 2024 due to one-time gains from state-run corporations, those sources have been exhausted. With economic growth slowing in 2025, the government lowered its 2026 revenue target to 16.2 percent of GDP.
A significant portion of the proposed budget is already committed to fixed obligations such as salaries, pensions and debt interest. Debt servicing alone is projected to reach approximately P950 billion, representing nearly 14 percent of total spending. This creates pressure on allocations for infrastructure, transport and disaster preparedness.
To counter these constraints, the office recommended modernizing agriculture to stabilize food prices and implementing an industrial policy to strengthen manufacturing.
See said that while current GDP growth is steady and unemployment is low, the economy remains vulnerable to external shocks because of a weak domestic production base and overreliance on the services sector.
The advisory body also cited the need for digital procurement systems to reduce inefficiencies and the creation of buffer stocks for food and energy reserves. These measures are intended to insulate the domestic economy from global supply chain disruptions.
See described the macroeconomic assumptions for the 2026 budget as credible but fragile, citing risks from oil price volatility and geopolitical tensions.
To improve the fiscal outlook, the office suggested strengthening tax administration and prioritizing peso-denominated debt issuances to manage the country’s rising obligations.
