PH urged to hasten reforms, contain graft

The Philippine government must act swiftly to contain the corruption scandal that has disrupted public works, as stalled projects are depriving the economy of a potentially significant boost from infrastructure spending.

In a note to clients, German banking giant Deutsche Bank estimated that a 20 percent year-on-year increase in government infrastructure outlays could lift real gross domestic product (GDP) growth by 0.7 to 1.3 percentage points—gains that the country may be missing out as graft investigations slow disbursements.

Stronger public investment, the bank said, would ripple through the economy, stimulating consumer and business activity both directly, through procurement and project spending, and indirectly, by lifting confidence.

Still, Deutsche Bank noted that a sharp increase in infrastructure spending could bring risks. Higher outlays may spur dollar outflows as imports climb to meet the demands of faster construction activity and stronger consumer spending, potentially putting pressure on the peso.

For now, however, the bank said those risks appear limited, as the anticorruption crackdown has frozen projects and dented confidence—developments that could temper imports and ease pressure on the local currency in the near term.

“This underscores the need for the government to press on with reform amid the ongoing probe to restore confidence in the economy, while also making sure that reallocated budget funds are disbursed as planned,” Deutsche Bank said.

President Marcos ordered an investigation into anomalous flood control projects, a scandal that ensnared lawmakers, Cabinet members and government engineers.

The scandal sent consumer confidence plummeting to a pandemic-era low of -22.2 percent in the last three months of 2025, while direct government spending on infrastructure contracted by 40.1 percent year-on-year in October last year, based on latest available data.

An Inquirer poll of 14 economists yielded a median GDP growth estimate of 4.2 percent for the fourth quarter of 2025, indicating that average growth last year may have settled at 4.8 percent. If borne out, the figure—set to be released on Jan. 29—would fall short of the government’s 5.5- to 6.5-percent growth target for 2025, extending a streak of missed annual goals that began in 2023.

In a separate commentary, economists at UnionBank of the Philippines said the domestic political system requires “immediate repair, particularly in governance,” though they noted that this may come at the cost of reduced focus on growth recovery.

“If these developments translate into a lame-duck scenario for President Marcos in the final half of his term, his remaining legislative agenda—especially key political reforms such as the antidynasty bill—may be delayed, with possible passage only after the 2028 elections,” they said.

“The unfinished task of ensuring full fiscal accountability, which is essential for a sustainable recovery following below-potential growth in 2026 to 2027, may ultimately hinge on the outcome of the 2028 polls,” they added.