More economic pain coming

For the past six months, the US-Iran conflict has intensified, causing economic concerns worldwide. In the Philippines, despite the surge in crude oil prices and upward pressure on various product prices, people have adjusted to the situation, maintaining optimism. The country has even started planning for the holidays, with malls already adorned in festive decorations and sales for early Christmas gifts.

However, the situation remains precarious. Early in the conflict, there was concern that Iran might attempt a pincer move on the Persian Gulf region with the help of Houthi rebels. Although the US initially attempted a military approach, they have since shifted to diplomacy. Yet, the unstable President makes a peaceful resolution difficult to achieve.

Meanwhile, the US has started a trade war with Canada, its closest ally. The President is also considering imposing new tariffs on all trade partners. A recent report by former Bangko Sentral ng Pilipinas officials Diwa Gunigundo and Wilhelmina Manalac highlights that while employment figures may appear positive, the labor market masks underlying economic weakness. The unemployment rate rose to 6% in July, the highest recorded since the pandemic, with 3.14 million Filipinos unemployed.

Despite the rising unemployment, the report suggests that the labor market reflects the economy's strength and momentum. The report warns that the economy could face a challenging combination of weaker demand and persistent cost pressures if output growth slows and inflation remains high. The policy priority, according to the report, should be to revitalize investment and productivity, strengthen sectors with the potential to generate quality employment, and ensure that growth translates into better jobs and real income for Filipino households.