THE PHILIPPINE ECONOMY might even see a slowdown until early 2026 because the controversy over anomalous infrastructure projects dampens government spending, Finance Secretary Ralph G. Recto said on Tuesday.
At a Senate hearing for the Department of Finance budget, Mr. Recto said growth likely slowed within the third quarter as President Ferdinand R. Marcos, Jr. implemented reforms amid the corruption scandal.
“This (slowdown) could stretch until the primary quarter of next 12 months,” he said. “The recent flood control controversy can have forged a shadow on public spending, but that is the beginning of a cleanup, and we only see upside over the subsequent few months.”
In July, Mr. Marcos flagged irregularities in flood control projects and launched the sumbongsapangulo.ph website, which lets residents report substandard or nonexistent public works.
“The President himself is the whistleblower of this controversy. And his message is obvious: We are going to never turn a blind eye to corruption,” Mr. Recto said.
The corruption scandal sparked investigations by the Senate, the House of Representatives, Justice department, and the newly formed Independent Commission for Infrastructure. It also renewed scrutiny over the Department of Public Works and Highways (DPWH), slowed infrastructure spending, and triggered a P255-billion cut within the DPWH’s budget for 2026.
“If a part of the budget hadn’t been lost to corruption, the economy might’ve been growing by around 6% to six.2%, and revenue collections from the BIR (Bureau of Internal Revenue) and BoC (Bureau of Customs) would’ve been higher,” Mr. Recto said.
Despite this, he remained confident that the economy would still meet the lower end of the federal government’s 5.5% to six.5% growth goal this 12 months.
In the primary six months of the 12 months, the country’s gross domestic product (GDP) growth averaged 5.4%.
The Finance chief also noted that weather-related disruptions affected economic activity within the third quarter.
“Our approach is anticipatory and strategic, ensuring that available fiscal space is directed toward high-impact, fast-disbursing projects to counteract the potential growth slowdown and help keep full-year GDP growth throughout the DBCC (Development Budget Coordination Committee) assumptions,” Mr. Recto said.
Mr. Recto said it might take the federal government two to a few quarters “at most” to deal with the flood control issue but infrastructure spending will “definitely contract next 12 months.”
Meanwhile, Economy Secretary Arsenio M. Balisacan said meeting the full-year growth goal has “develop into harder” amid a probable slowdown in government spending and chronic external headwinds.
“But we’ll wait for the discharge of the third-quarter economic performance (in the primary week of November) before the DBCC makes a move,” he told BusinessWorld in a Viber message on Tuesday.
The Philippine Statistics Authority will release first-quarter GDP data on Nov. 7.
MORE RATE CUTS
Mr. Recto, who sits on the Monetary Board, said more rate cuts can be “good for the economy.”
“All of it is dependent upon the lookout for inflation. For now, it looks like it’s going to be inside goal, and now we have reduced rates of interest already. Hopefully, one other rate cut,” he said.
The Bangko Sentral ng Pilipinas (BSP) last week cut its key policy rate by 25 basis points to 4.75% because it sought to support economic growth as the corruption scandal darkens the outlook.
BSP Governor Eli M. Remolona, Jr. last week left the door open for an additional cut on the Dec. 11 meeting, and possibly more next 12 months.
Mr. Recto said the slowdown in global trade and the specter of a 100% US tariff on Chinese goods will be factored into the BSP’s next policy move.
Meanwhile, the federal government stays on course to satisfy its revenue goal this 12 months, the Finance chief said.
“We are going to hit our revenue targets for the complete 12 months. And our revenue-to-GDP ratio is climbing, we’re already at roughly 16.5%,” Mr. Recto said. “Clearly, the issue lies on the expenditure side, not on the revenue side.”
The federal government goals to gather P4.52 trillion this 12 months, climbing to P4.98 billion in 2026, based on the 2026 Budget of Expenditures and Sources of Financing.
Nonetheless, the BIR and BoC are expected to fall barely wanting their 2025 collection goals of P3.22 trillion and P958.7 billion, respectively.
Mr. Recto also noted that slowing economic growth and global uncertainties corresponding to the higher US tariffs are affecting revenue collection. — Aubrey Rose A. Inosante