Marcos faces growth test as graft probe stalls projects
The ongoing probe into alleged corruption in government-funded flood control projects could cause short-term disruptions in construction, potentially undermining President Marcos’ infrastructure agenda and growth ambition, Pantheon Macroeconomics said.
In a note to clients, Pantheon economist Miguel Chanco warned that the antigraft campaign may stir up risk aversion among both private contractors and public agencies, leading to a near-term squeeze in infrastructure development.
That could complicate the Marcos administration’s push to meet its 5.5 to 6.5 percent growth target this year, which relies in part on sustaining infrastructure spending at 5 to 6 percent of gross domestic product annually.
“Notwithstanding the ongoing political fallout, Mr. Marcos’ targeted anti-corruption drive probably will hit construction activity in the next few quarters, as public and private participants engage more cautiously in a sector that’s now under a spotlight,” Chanco wrote.
“Any short-term squeeze on public infrastructure development is likely to be seen in the macro data,” he added.
Latest data showed direct state spending on infrastructure hit P621 billion in the first half, slightly below the P620.2 billion program.
Long-run
Mr. Marcos has created the Independent Commission for Infrastructure, or ICI, to investigate alleged anomalies in flood control projects. Public Works Secretary Vivencio Dizon had warned that the value of misappropriated funds from such irregularities could run into the trillions of pesos.
Last week, Dizon said the Department of Public Works and Highways had cut down its proposed 2026 budget by P255 billion, largely by eliminating the entire allocation for locally funded flood control projects.
On the ground, the probe has reportedly prompted many contractors—even those with no involvement in flood control—to suspend or scale back operations. Some banks have also held off on releasing new loans tied to such projects.
The corruption scandal has already set off political tremors. Leyte Rep. Martin Romualdez formally resigned last week as speaker of the House of Representatives in a bid to shore up the chamber’s credibility after allegations linked him and other lawmakers to questionable public works projects.
Looking ahead, Pantheon’s Chanco said that while the investigation is likely to inflict short-term pain, the broader anti-corruption drive could prove positive for the economy in the long run.
“To be sure, the bigger the clean-up in the short run, however painful for current activity, the better it will be for the economy’s long-term prospects, as the poor quality of governance remains a major headwind in the Philippines,” he said.
