Economic paralysis

The massive scale of the flood control corruption scandal appears to have distracted the administration’s economic managers from the urgent tasks at hand. Proof is the dismal 3-percent economic growth in the last quarter of 2025, the country’s worst economic performance since the 3.8-percent slump in the first quarter of 2021 caused by the COVID-19 pandemic. Excluding this period, it was the slowest since the 1.8-percent contraction in the fourth quarter of 2009. For the full year 2025, the economy expanded by only 4.4 percent, missing the government’s target.

While it is easy to blame factors beyond the government’s control, such as the typhoons and the global tariff scare, nothing much has actually been heard from the economic side of managing the country ever since the corruption scandal went public in July last year. The government appears to have been paralyzed by the tighter public scrutiny of government spending. As a result, public expenditures even for noninfrastructure economic activities slowed down abruptly.

A bright spot in 2025 was agriculture, which expanded by 3.1 percent for the year, reversing the 1.6-percent contraction in 2024. In contrast, however, industry, which accounted for a third of the economy, contributed a mere 0.4 percentage point to the growth. The increase in government expenditures also fell significantly from 18.7 percent in the first three months of last year and 9 percent in the fourth quarter of 2024 to only 3.7 percent in the last quarter of 2025, reflecting tighter public spending due to the corruption scandal.

Engines of growth

The assessment by the Ibon Foundation of the economic performance last year is worth noting as it pointed to the problem that was actually afflicting the economy. It lamented that temporary demand drivers, especially household consumption, that fueled the expansion since the mid-2000s had weakened even before the pandemic, and agriculture and manufacturing have been neglected and failed to serve as engines of sustained growth.

It argued that the biggest factor in the economic deceleration is the easing of household consumption since 2017. Meanwhile, proof of the failure of agriculture and manufacturing as sustainable engines of growth and job generators, according to Ibon, is the fact that latest gross domestic product data confirmed that manufacturing’s share of the economy has fallen to 17.3 percent, the smallest in 76 years, and agriculture to 7.9 percent, the smallest in history. It warned that this will persist unless genuinely transformative structural reforms are undertaken, among them completing agrarian reform, massive public investments to improve rural productivity, and a determined plan for Filipino industrialization.

Low-hanging fruit

Indeed, the Marcos administration’s economic team need not be distracted by the corruption scandal and should focus on bringing the economy back on the growth track.

Focus on agriculture, a sector hosting the majority of the poor. The move of the Department of Agriculture stopping all applications for the conversion of farm lands to other uses is a good starting point. The sector’s improved performance last year should encourage the agency’s leadership to implement more measures to improve the lot of farmers and fisherfolk. For instance, extreme weather disturbances visit the country with regularity, thus we have the so-called typhoon season. Yet, the agriculture sector still keeps farmlands in the known paths of these typhoons. It is time to move farming areas to provinces where historical data show are least visited by typhoons.

Tourism is another sector that can help offset the slack in economic growth. Long considered a low-hanging fruit, not much progress has been done in improving access to the country’s renowned tourist destinations.

Investment destination

Many airports and seaports remain small and dilapidated, and plane fares to local destinations such as the famous Siargao Island are way more expensive than those for travel to Hong Kong, Thailand, or Vietnam. Even the provision of basic necessities such as potable water and sufficient electricity in many tourist spots is sorely lacking.

The Department of Energy needs to work harder on ensuring supply security and lessen the country’s dependence on imported fuel. It needs to fast-track efforts to increase the share of renewable sources to the country’s energy mix. The Department of Trade and Industry and its attached agencies likewise need to exert extra effort in promoting the country as an investment destination. The Department of Finance and its attached revenue-generating agencies must also pursue tax collection efficiency measures and plug loopholes to provide enough funds for the other agencies to undertake activities needed to prop up the economy.

As it is, the government seems paralyzed by the flood control corruption scandal. The economic team must awaken from the stupor and perform their respective governance roles in order to reverse the crippling economic slowdown.