By Joey Sarte Salceda
Chair, Institute for Risk and Strategic Studies
By conventional standards, the Philippine economy is doing fine. Growth rates, while not stellar, remain good. Prices are stable. Debt to GDP is stable and well within manageable bounds. These are not cosmetic achievements. They are the outcome of deliberate policy choices made over many years.
Stability, however, can also be a warning sign. It tells us that we have reached a plateau. The challenge of 2026 is not to stabilize the economy. That work is largely done. The challenge is to move beyond the limits of macro-economics.
A Stable Plate
GDP growth that remains positive without dramatic swings reflects resilience. Inflation under control reflects policy credibility. Debt sustainability reflects hard fiscal decisions made before and after the pandemic.
In 2019, after years of fiscal reforms, the Philippines reached its lowest debt to GDP ratio in history. As then Chair of the House Committee on Ways and Means, I then believed that the tax to GDP ratio was the key metric. That belief proved correct. Revenue reforms created fiscal space, and fiscal space created stability.
Fiscal space, howver, is not the same as progress.
When Tax Reform Runs Out
The reality today is that tax reforms have reached its natural limits as a growth engine. Most of what tax policies could do to raise revenue efficiently has already been done.
What remains is largely defensive. Protecting the tax base from erosion caused by digitalization and imported services; policing transfer pricing in a globalized economy; and managing the race to the bottom as countries compete for capital, are the new challenges.
These reforms are necessary, but they are also harder to pass under current political conditions. They tend to be technical; easily misunderstood; and framed as anti-business or anti-consumer despite being essential for fairness and sustainability. In a more polarized environment, even well-designed revenue protection measures face resistance, delay, or dilution.
As a result, tax reform today is not just limited in its economic impact. It is constrained politically.
Why Revenue Was Never the Goal
I believed in tax reforms because public good tends to generate more growth than private investments, up to a point. Infrastructure, education, health, and institutions produce returns that markets cannot fully capture.
This logic, however, depends on systems that work. Revenue is only meaningful if it translates into functioning housing systems, reliable health care, competent schools, and predictable public services.
By 2026, the problem is no longer revenue. The problem is conversion.
The Missing Middle
Macro-economics operates at the level of aggregates, growth, inflation, debt, deficits. These numbers matter, but they do not tell us whether a family can afford a home; whether illness can lead to bankruptcy; or whether education leads to opportunities.
Those outcomes are determined at the meso-economic level — housing policy, health systems, education delivery, transport, logistics, and urban forms.
The next phase of reform must happen here. This is the real policy frontier of 2026.
Technology Is Moving Faster Than Institutions
The world is not standing still. Innovations in energy, data, and artificial intelligence are accelerating. Much of what is needed to address climate change already exists, particularly in China and the United States.
The danger is not technological scarcity. The danger is institutional lag. Countries that cannot absorb, adapt, and deploy these technologies will simply fall behind, regardless of their macro-indicators.
Tourism as a Warning
Tourism shows how this failure plays out in practice.
In Albay, when I was governor, international tourist arrivals reached around 330,000 annually, comparable to Bohol and Boracay at the time. Today, that number has fallen to around 45,000.
This is not a failure of GDP growth or inflation control. It is a failure of systems. Access, infrastructure, marketing, coordination, and governance all matter. Without them, potentials evaporate.
Paralysis and the Politics of Suspicion
At the same time, governance is being undermined by constant drips of partial disclosures. Leaked Department of Public Works and Highways files, selectively released documents, and media spectacles create an atmosphere where everyone is afraid to act.
I suspect many of these files were never released in full because, taken in their entirety, their claims would not hold. Until transparency is complete, however. the effect is paralysis. Institutions freeze; officials hedge, and reforms slow down.
This state of permanent suspicion may be more damaging than corruption itself.
The Real Task in 2026
The task for 2026 is not another round of macro-fine tuning. It is to make the state work again at the level people actually experience.
That means moving from managing aggregates to fixing systems; from celebrating growth to delivering outcomes; from fiscal capacity to institutional capability.
Macro-economics gave us stability. It cannot give us dignity, opportunity, or confidence in the future. That work lies elsewhere.
And that is the real challenge ahead.