Economy likely to grow below target as corruption issues drag on

THE PHILIPPINE ECONOMY will likely grow below target this year and in 2026, as it continues to be weighed down by a global economic slowdown and corruption issues, an economist said.

University of Asia & the Pacific School of Economics Senior Economist Victor A. Abola said at a briefing that gross domestic product (GDP) is likely to grow by 5.1% this year, after a “little bump” in the fourth quarter due to base effects.

The Philippine economy grew by 4% in the third quarter, the slowest growth seen in over four years as a corruption scandal stalled public construction and dampened consumer and investor sentiment.

In the first nine months, GDP growth averaged 5%, well below the government’s 5.5-6.5% target for 2025.

Mr. Abola said fourth-quarter growth may be driven by the stable jobs market and low inflation.

“Well, I think that low inflation means more purchasing power for consumers. I did not emphasize employment, but it has been stable. I mean, over 50 million are employed. That’s a good threshold because the average last year was below that,” he said.

Mr. Abola projects inflation to average 1.7% in 2025 and 2.2% in 2026.

For 2026, Mr. Abola said that he expects 5.3% GDP growth if the government manages to sort out issues on corruption, and partly due to low base effects.

This would still be below the 6-7% growth target of the government.

“Besides that, I think you would have sorted out a lot of these issues on corruption so that spending will be resumed, particularly since we know that from the budget, they are moving some of the infrastructure spending to education and social welfare,” he said.

However, Mr. Abola said GDP could grow by 6% next year, if the country will let the peso further depreciate.

“If you aggressively let the peso depreciate, as in terms of policy, because for us specifically, weaker peso is faster growth,” he said.

He expects the peso to end at P58.5 per US dollar this year, and P61.75 per dollar next year.

On Wednesday, the peso closed at P58.935 against the US dollar, up by five centavos from its P58.985 finish on Tuesday, Bankers Association of the Philippines data showed.

NEGATIVE FORCES
Meanwhile, Mr. Abola said the corruption scandal is one of the “negative forces” affecting the economy, as the patience of the public is being tested.

“The question is how long will it last? Well, this is going to be a test of how patient we are… but I think everybody’s reading is that this situation cannot be tolerated,” he said.

“This is the bottom line: people want concrete criminal charges and jail terms already. I think that this will happen by the first quarter of this coming year,” he added.

The Philippine government is currently investigating a multibillion-peso public works scandal involving government officials, lawmakers and private contractors.

The Office of the Ombudsman on Tuesday formally filed criminal charges for graft and malversation against a former lawmaker and several Public Works officials before the Sandiganbayan, marking the first batch of cases brought to the court amid the flood control project scandal.

Mr. Abola said what makes the issue different now is that even low-income people are affected. “And it is not just in Metro Manila; I expect that the rallies will be across the country,” he added.

Mr. Abola said the government has to undertake serious reforms to curb corruption. “Hopefully, it is an opportunity for us to be able to do some serious reforms, particularly in safeguarding the spending, so that there will be less corruption. There’s always corruption, but we have to ensure that it’s minimized,” he added.

The Finance department estimated losses due to corruption related to the Department of Public Works and Highways flood control projects could have reached between P145.4 billion to P407 billion from 2023 to 2025. — Justine Irish D. Tabile