Low inflation and unemployment, high spending and budget deficit
October 9, 2025 | 12:00am
Despite the overall economic pessimism in the country today due to continuing corruption scandals affecting both the executive and legislative branches, there are glimmers of economic optimism we should look forward to. I am referring to the low inflation and low unemployment rate of the country.
This week, the Philippine Statistics Authority (PSA) released the inflation figure for September 2025 of only 1.7 percent, then the unemployment figure for August 2025 of 3.9 percent, both low levels and hence, good news.
I computed the average inflation for January-August 2025, in Asia: Japan 3.4 percent, Vietnam 3.3 percent, Cambodia 3.0 percent, India 2.9 percent, Pakistan 2.3 percent, South Korea 2.0 percent, Taiwan 1.8 percent, the Philippines 1.7 percent, Hong Kong and Indonesia 1.5 percent, Malaysia 1.4 percent, Singapore 0.8 percent, Thailand 0.1 percent, China -0.1 percent. China has deflation, Japan is the new “inflation capital” of East Asia, and the Philippines is back to a low-inflation regime.
Inflation over the same period in America: Brazil 5.2 percent, Mexico 3.9 percent, US 2.7 percent, Canada 2.0 percent.
In Europe: Turkey 36.6 percent, Russia 9.6 percent, Romania 6.1 percent, Poland 4.1 percent, Netherlands 3.4 percent, UK and Austria 3.3 percent, Belgium, Czech Republic and Greece 2.6 percent, Spain 2.5 percent, Germany 2.2 percent, Italy 1.7 percent, France 1.0 percent.
So our inflation this year is midway among Asian countries, lower than those in America and Europe except France.
I also computed the average unemployment rate in January-August 2025. Several countries in Asia do not have monthly unemployment, they have quarterly like Singapore, Thailand and Vietnam, while Indonesia has March data only. Here is the average for Asia: India 6.1 percent, China 5.2 percent, Indonesia 4.8 percent, the Philippines 4.1 percent, Taiwan and Hong Kong 3.4 percent, Malaysia 3.0 percent, S. Korea 2.7 percent, Japan 2.5 percent, Vietnam 2.2 percent, Singapore 2.0 percent, Thailand 0.9 percent. Australia has 4.2 percent.
Average unemployment rate over the same period in America: Canada 6.8 percent, Brazil 6.3 percent, US 4.2 percent, and Mexico 2.6 percent.
In Europe: Spain 10.9 percent, Sweden 9.2 percent, Turkey 8.3 percent, France 7.5 percent, Germany 6.3 percent, Italy 6.2 percent, Belgium 6.1 percent, Poland 5.3 percent, UK 4.6 percent, Netherlands 3.8 percent, Russia 2.3 percent.
So, our unemployment rate this year is midway among Asia and America and lower than Europe. In addition, our labor force participation rate is 64 percent average this year. LFPR is an indicator of people’s optimism or pessimism about the jobs market. If they think they can find a good job or the business environment is good, they go out to look for jobs or start a new business, and LFPR goes up to 64 percent or higher. If people think there are not enough good paying jobs, they either stay home or pursue other studies and training and LFPR goes down to around 63 percent or lower.
So these are two good things we can console ourselves with. The private sector remains resilient overall in creating more jobs and producing more goods and services that stabilize overall consumer prices.
The economic team — Finance Secretary Ralph Recto, Economics Secretary Arsenio Balisacan, Budget Secretary Amenah Pangandaman, Special Assistant to the President for Investment and Economic Affairs Frederick Go, along with Bangko Sentral Governor Eli Remolona Jr. — deserve public support for the various policies they laid down minus imposing price control of important commodities.
Our third quarter 2025 GDP performance will be released a month from now. The first country in the world to report its Q3 2025 is Vietnam, another whooping 8.2 percent growth. Their Q1-Q3 2025 average growth is already 7.8 percent.
The average Q1-Q2 2025 growth in East Asia is as follows: Taiwan 6.7 percent, the Philippines 5.5 percent, China 5.3 percent, Indonesia 5.0 percent, Malaysia 4.4 percent, Singapore 4.3 percent, Thailand 3.0 percent, Japan 1.5 percent, South Korea 0.3 percent.
The rest of G7 industrial countries, their Q1-Q2 average growth are as follows: US 2.0 percent, Canada 1.8 percent, UK 1.6 percent, France 0.7 percent, Italy 0.6 percent, Germany 0.2 percent.
I am hoping for a 6.0 percent Philippine growth in Q3 but a more realistic number is between 5.5 and 6.0 percent. Still this is a good achievement compared to many East Asians, all of G7 and the rest of North America and Europe.
About the ongoing corruption scandal at the DPWH and involving many legislators both at the House of Representatives and the Senate, the culprit is a culture of waste, non-accountability and disregard for the overall fiscal condition of the country.
Prior to the lockdown period of 2020-2021, our average budget deficit in 2018-2019 was only around P0.6 trillion a year. During lockdown years it jumped to P1.5 trillion a year. From 2022 to 2024, it still averaged at P1.5 trillion a year despite the absence of any economic or virus crisis.
Many agencies went on a spend-spend-spend culture. New subsidies were created without abolishing old and non-performing subsidies. PhilHealth has returned funds to the National Treasury this year. President Marcos Jr. has recognized that it was a mistake and is incorporating a P53-billion funding allocation for 2026.
The President should prioritize reducing the outstanding public debt which is now approaching P18 trillion from only P8 trillion in 2019. He should do large scale spending cuts, tight fiscal discipline across many agencies and departments.
When agencies feel the tightness in funding, they will be forced to be more responsible, more accountable and less corrupt in spending.
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