[In This Economy] The populist economics of SONA 2026

If you sat through President Ferdinand Marcos Jr.’s fifth State of the Nation Address (SONA) last Monday, July 27, you may have noticed a common thread: giveaways. Cash aid, tax exemptions, higher pensions, cheaper electricity, free medicines. All in all, it was arguably Marcos’ most populist SONA yet. That is to be expected given this year’s many economic headwinds. Recall that growth slumped to 2.8% in the first quarter, the weakest in five years, and inflation spiked anew after the Middle East conflict sent oil prices soaring: it averaged 4.8% in the first half, well above the 2% to 4% target of the Bangko Sentral ng Pilipinas (BSP). With prices again eroding Filipinos’ purchasing power, the government itself has trimmed its 2026 growth target to 3.5% to 4.5%. Tellingly, the speech was silent on our long-promised rise to upper middle-income country (UMIC) status, a milestone Malacañang used to trumpet. Perhaps few Filipinos would find that boast believable now. Ayuda as centerpiece Much of the speech dwelt on ayuda or financial aid. Marcos touted UPLIFT, a new banner for the government’s assistance programs, alongside AICS (Assistance to Individuals in Crisis Situations), the cash-for-work program TUPAD, Kadiwa stores, and subsidized rice under Benteng Bigas Meron Na (P20/kilo rice already available). Notice the timing, too. UPLIFT is a brand-new banner under the Department of Social Welfare and Development (DSWD), unveiled amid high inflation but also barely two years before the 2028 presidential election. Will UPLIFT be ramped up in the run-up to the next elections? Time will tell. Marcos also claimed that “ang pera ng taumbayan na muntik mapunta sa bulsa ng mga tiwaling opisyal ay naisalba natin” (we saved the people’s money from the pockets of corrupt officials). He cited nearly P25 billion in funds recovered, frozen, or preserved amid the flood control scandal, of which more than P800 million is back in the Treasury. But set against a grand scam costing, by some estimates, trillions of pesos, that is a drop in the bucket—and certainly not all of that went to ayuda. The giveaway framing extended well beyond cash. Marcos announced talks with oil companies and a push to cut taxes on LPG and kerosene. On health, he promised free consultations, laboratory tests, cancer screenings, and up to P20,000 worth of maintenance medicines yearly under PhilHealth’s YAKAP program (Yaman ng Kalusugan Program), on top of the removal of VAT on medicines and “zero balance billing” in public hospitals. These health measures are arguably the most defensible of the lot, since primary care has long been neglected. But they still reinforce populist measures—and the sense that the speech was engineered largely to generate applause. Sure, ayuda has its uses in hard times. But is this the best we can do? By itself, aid does not create jobs, raise productivity, or attract investments. A strategy for new growth drivers is needed, but was conspicuously omitted. Corruption without closure Then there’s the elephant in the Batasan’s plenary hall: the flood control scandal that erupted in 2025 still has no credible resolution. Marcos boasted that his administration “exposed” the corruption. But if you think through it, Marcos is really fixing a problem partly of his own making: he signed the very budgets that carried the anomalous insertions. A Marcos-led anti-corruption drive is truly something of an oxymoron. Many personalities also remain scot-free. Budget secretary Amenah Pangandaman went unmentioned. Former Ako Bicol representative Zaldy Co is still on the loose. Just days before the SONA, the Ombudsman announced they would file plunder complaints against the President’s cousin, former House speaker Martin Romualdez, and no one has been convicted so far. The truth is that the wheels of accountability could have turned much faster. Marcos claimed that money saved from anomalous flood control projects went to education and health, but such claims are difficult to verify and audit. When it comes to the supposedly reformed budget process, the government should open the scrutiny of the Department of Public Works and Highways (DPWH) budget to civil society groups, so that citizens themselves can track where the recovered (and remaining) funds actually flow. In the previous budget season, civil society groups’ participation was by and large tokenistic. Business leaders are closely watching President Marcos’ supposed anti-corruption drive, but in the meantime prospective investors seem to be flocking to Vietnam and other more promising neighbors where rule of law prevails, relatively speaking. Populism in the fine print Even the reform announcements had a populist ring to them. Take the surprise push to exempt those earning up to P350,000 a year from income tax, a sequel to the 2018 TRAIN law’s P250,000 exemption. Relatively few may benefit: most Filipino workers are in the informal sector and effectively pay no income tax to begin with. The promised relief from the minimum corporate income tax may prove similarly narrow, since the CREATE (2021) and CREATE MORE (2024) laws already cut corporate income taxes. Marcos pitched these tax cuts as a way to spur growth. But the evidence for such “trickle-down economics” is thin at best. What is certain is the revenue that the government stands to lose at a time of widening deficits. Take also the call to scrap system loss charges, or the fees consumers pay for electricity lost in distribution. The Energy Regulatory Commission (ERC) already caps how much can be passed on, and much of this year’s surge in power bills traces instead to the weaker peso and costlier imported fuel. Some amount of system loss is also inevitable, due to the physics of power transmission and distribution. To be fair, the SONA’s push for renewables and energy storage systems is welcome. But investments in renewables must be accelerated, and it will take years to bring down electricity prices substantially. What about new growth drivers? As expected, Marcos mentioned Pax Silica, the US-led, 23-country tech alliance. But which investments will materialize? We don’t know yet. AI data centers demand enormous power and water, an awkward fit for a hot, water-stressed country. Pax Silica could be transformative, but only if it raises the exporting capabilities of our industries. Otherwise it may amount to little more than a new economic zone. One last claim deserves scrutiny. In an ongoing study on ayuda, our preliminary findings suggest that politicians’ guarantee letters or GLs, and patronage in ayuda more broadly, are very much alive, contrary to President Marcos’ claim that these have been stamped out. All this makes the 2027 budget, to be crafted in the coming months, the real test of Marcos’ vow to “finish what [he] started.” I’m not holding my breath: likely, Congress will stuff it anew with ayuda and insertions. I also expect that through the next budget, Marcos will begin to reward lawmakers who voted to impeach Vice President Sara Duterte for the second time around. Sure, this year’s SONA seems to be a bit more polished and better crafted—in form, at least. In terms of substance, though, it’s terribly populist, and still just full of hot air. – Rappler.com Jan Carlo “JC” Punongbayan, PhD is an associate professor at the University of the Philippines School of Economics (UPSE). His professional experience includes the Securities and Exchange Commission, the World Bank Office in Manila, the Far Eastern University Public Policy Center, and the National Economic and Development Authority. JC writes a weekly economics column for Rappler.com. He is also co-founder of UsapangEcon.com and co-host of Usapang Econ Podcast. His first book, False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them, was published by Ateneo de Manila University Press in February 2023. His second book, Twin Plagues: How Duterte and Covid-19 Wrecked the Philippine Economy, will be published by Penguin Random House SEA in June 2026. Follow him on Instagram (@jcpunongbayan). Below are In This Economy pieces you may have missed: Click here for other In This Economy articles.