Infrastructure spending boost seen key to faster PH growth in 2026

A recovery of government infrastructure spending after a deep slump triggered by the flood control scandal would be the most effective way to accelerate growth, ANZ Research said, arguing that the boost from interest rate cuts is still debatable in an environment of weakening confidence.

In a note to clients, Sanjay Mathur, ANZ’s chief economist for Southeast Asia, said that while the Bangko Sentral ng Pilipinas (BSP) may opt for one last final rate cut to support the economy, there are repercussions from the graft fallout that may not be effectively addressed through monetary policy easing.

“There has been a downshift in the growth in the Philippines as repercussions from governance-related issues in public infrastructure projects have not receded,” Mathur wrote. “The resulting weakness in public spending, particularly on the capital side, has permeated into the household and business sectors.”

“The efficacy of the monetary policy easing cycle against the backdrop of low household and business confidence is debatable,” he added. “In our view, a revival in government spending is the most appropriate pathway to faster growth.”

Lowered growth target

Earlier this month, economic officials in the Marcos administration trimmed their 2026 growth target to 5 to 6 percent, from the previous goal of 6 to 7 percent, underscoring the economic costs of the sweeping investigation into anomalous flood control projects.

ANZ’s Mathur estimated that growth in the fourth quarter of 2025 may have settled at a “sub-potential” rate of 4.5 percent, which, he said, is likely to validate the need for an additional cut in the policy rate.

To help “compensate” for the effects of the graft fallout, the BSP cut its benchmark rate by a quarter point to 4.5 percent last December, bringing total reductions since the easing cycle began in August 2024 to two percentage points.

Source: Inquirer

Only 65 percent of farm-to-market roads completed in 5 years

Only 65 percent of the 4,810 farm-to-market road (FMR) projects under the Department of Public Works and Highways (DPWH) were completed from 2021 to 2025, according to the Department of Agriculture (DA).

Only 3,135 projects were completed in the past five years, according to preliminary FMR data the DA shared with the media through its transparency platform, which is currently in beta testing.

Data showed that at least 817 FMR projects have not commenced while 34 projects have been deferred, according to the DA.

Meanwhile, there are at least 677 ongoing funded FMR projects during the five-year period.

There are still at least 27 FMR projects funded in 2021 that are ongoing while there are three more financed in 2022 that are yet to be completed, based on the database.

Data also showed that there are still 28 ongoing FMR projects funded in 2023, 213 projects in 2024 and 406 projects under the 2025 budget.

The DA is updating and refining the database since it is still in its beta stage. The DA plans to publicly launch the transparency platform, dubbed FMR Watch, by February.

The platform features real-time project monitoring and updates as well as detailed financial information and budget for every FMR project. The public can access these for free and is encouraged to scrutinize the FMR projects and subsequently provide feedback and even complaints to the DA.

Each project has been geotagged with proper progress documentation from the start of procurement up to its completion.

The DA vowed to respond to citizens’ complaints regarding FMR projects within 24 hours once the transparency portal has been rolled out.

Throughout the five-year period, the government allocated P76.52 billion for all the 4,810 FMR projects. The 3,135 completed FMR projects were equivalent to nearly 2,400 kilometers of road.

Based on its estimates, at least 721,500 farmers have benefitted from the completed FMR projects across 2,400 communities nationwide, saving them 7,800 hours in transportation time while allowing them to move 240,000 metric tons of produce, according to the DA.

Central Luzon had the top budget allocation for FMR projects at P9 billion followed by the Bicol Region at P7.7 billion and Ilocos Region at P7.4 billion.

The DA assured the public that it has all the capabilities to undertake the completion of FMR projects this year worth P33 billion. 

The implementation of the FMR projects has been transferred to the DA following the controversies and issues surrounding DPWH’s infrastructure projects.

The DA also vowed to construct cheaper but still quality FMRs this year as it seeks to build more roads with its budget. The DA said its FMR projects will cost less than the P15 million per kilometer allocated budget in the past.

Source: Philstar

Philippines targets 4.3% of GDP for infrastructure spending in 2026

The Department of Budget and Management (DBM) cut its infrastructure spending target to 4.3% of gross domestic product (GDP) this year from 5.1% previously, as a corruption scandal weighed on government spending and economic growth last year.

The lower target translates to about P1.3 trillion in infrastructure outlays, Acting Budget Secretary Rolando U. Toledo said on Tuesday, signaling a more cautious spending stance as the government works to restore confidence and streamline disbursements.

“Based on our approved General Appropriations Act, we’re looking at achieving our infrastructure target as [a percentage of our] GDP at 4.3%, and even at a nominal level, that is equivalent to P1.3 trillion,” he told a Palace briefing in mixed English and Filipino.

Infrastructure spending has been a key pillar of President Ferdinand R. Marcos, Jr.’s growth strategy, though execution slowed last year due to budget adjustments and project bottlenecks amid a massive graft scandal involving flood control projects.

The government had earlier set a target of 5.1% of GDP for infrastructure spending in 2026, equivalent to P1.56 trillion, lower than the 2025 target of 5.3% of GDP or P1.51 trillion.

In 2024, infrastructure spending accounted for 5.8% of GDP or P1.545 trillion.

Mr. Toledo said the government is still determined to boost investments in infrastructure in the medium term.

He said there is little risk of delays in infrastructure projects this year, after a “clean” budget process.

“There is no reason for us to delay,” Mr. Toledo said, adding that the 2026 national budget contains no “ghost projects” and that allocations across programs are fully specified, supporting the government’s ability to meet its infrastructure goals.

Mr. Marcos on Jan. 5 signed a record P6.793-trillion national budget amid a graft scandal, which has prompted tighter scrutiny of public spending and a more cautious approach to the release of funds for infrastructure and other major projects.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said slower public works spending may temper economic momentum because infrastructure has one of the highest multiplier effects in the economy.

“It may cap growth momentum, as public works have one of the highest multiplier effects in the economy,” he said via Viber.

“The more cautious stance may help restore governance credibility, but it also means less crowding-in of private investment, weaker job creation in construction and allied sectors, and slower productivity gains,” he added.

Economy Secretary Arsenio M. Balisacan last week said economic growth in the Philippines likely eased to between 4.8% and 5% in 2025, reflecting the impact of the graft scandal on the economy.

The Philippine Statistics Authority is set to publish official fourth-quarter and full-year 2025 GDP figures on Jan. 29.

Without faster execution, improved project selection, or stronger private investment to offset the slowdown, the Philippines’ economic growth could fall short of its potential even as confidence gradually improves, Mr. Rivera said.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said higher government spending — particularly on infrastructure — is likely to be the primary driver of economic growth in 2026.

He expects authorities to accelerate public works as early as the first quarter to make up for underspending last year, which he said was partly due to tighter anti-corruption measures and governance reforms.

A catch-up spending program could help bolster investor confidence and sentiment, Mr. Ricafort said, reinforcing the growth outlook.

He said prospective interest rate cuts by the US Federal Reserve and the Bangko Sentral ng Pilipinas would lower borrowing costs, supporting credit demand, investment and overall economic expansion.

Source: Business World