Ramping up infra spending
The government’s persistent underspending on critical infrastructure projects has unfortunately extended to the first quarter of this year, with total capital outlay slashed by almost half from the same period last year.
The Department of Budget and Management primarily attributed the dismal disbursement during the period to the underperformance of the Department of Public Works and Highways (DPWH), which is entrusted every year with one of the biggest budget allocations in the General Appropriations Act.
Unfortunately, the DPWH–which has already long been seen as one of the country’s most corrupt agencies–suffered another massive blow last year due to the multibillion-peso flood control scandal that has implicated some of the most powerful government officials in cahoots with corrupt DPWH personnel.
The significant slowdown in public spending, however, has come at a price that is becoming increasingly steep as it has pulled down economic growth along with it.
Last year, the Marcos administration’s infrastructure spending plunged by 17.3 percent to P1.096 trillion, far short of the programmed spending of the year of P1.35 trillion.
Slowest expansion
This in turn dragged down the overall expansion of the country’s gross domestic product (GDP) starting in the third quarter of 2025 when GDP growth fell sharply to 4 percent, a direct result of the suspension of DPWH infrastructure projects amid sweeping investigations by Congress, the Department of Justice, the Ombudsman and the now-defunct Independent Commission for Infrastructure.
The 26.2-percent fall in public construction spending in the third quarter of 2025 then became one of the factors behind the deceleration in the country’s 2025 economic growth to just 4.4 percent from 5.7 percent in 2024.
The 2025 growth was also the slowest expansion of the Philippine economy after the COVID-19 pandemic, a trend that will likely continue this year at the rate that the DPWH is going, and practically all the foreign think tanks have expressed the view that growth projections will not likely be met, at least until 2027.
According to the Organisation for Economic Co-operation and Development, the country’s growth will come in below the government’s target of 6-7 percent for 2026-2028 due in no small part to the “more persistent-than-expected weakness in public investment related to tighter corruption controls” that has indeed carried through to the first quarter of this year.
Global economic crisis
Growth in the first quarter this year came in at just 2.8 percent, undershooting both private sector and government expectations for the first three months, including March or the first full month after the United States and Israel invaded Iran and triggered the latest global economic crisis.
Thus, with the economy desperately seeking a source of growth or economic activity, the time has come indeed for the DPWH to strike a better balance between tighter controls and more rapid project implementation so that infra spending can start propping up economic growth instead of further weighing it down.
The Philippines is already being buffeted by factors outside of its control such as the spike in global oil prices, surge in prices of fertilizer needed to shore up agriculture projection and the overhang from higher tariffs on exports to the US.
Thus it should do a far better job of stimulating growth through what it has a more direct control of, which is public spending.
By this time, the DPWH should already have stricter mechanisms in place to protect funds and projects against corruption.
Negative forces
Any further delay in project implementation will compound on the negative forces pushing down the economy that already has to contend with the very real possibility that oil prices, utility costs and even bank interest rates will stay higher for far longer than anticipated.
As De La Salle University underscored in its May report on the economy, government spending was shielded from rising oil prices and higher interest rates, thus making the resumption of long-stalled and crucial infrastructure projects “a reliable avenue to keep growth on track in the second half of 2026.”
ING echoed this view, underscoring that government spending “will need to increase more meaningfully,” given that private consumption, the traditional powerhouse that drives 70 percent of the economy, will likely be suppressed with the Philippines going through a period of stagflation, that worrying combination of slowing and very weak GDP growth with high and rising inflation.
It has become imperative for the Marcos administration, specifically the DPWH, to shift its focus from suppression to implementation, using the lessons learned over the past few months so that it will still be able to exercise judicious control over these job-generation and economy-stimulating projects while letting them finally proceed as planned and thus give the suffering economy a much-needed shot in the arm.
