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

ARROW Act to unlock infrastructure projects

Long-delayed infrastructure projects in the Philippines could gain momentum with the passage of the Accelerated and Reformed Right-of-Way (ARROW) Act, according to analysts.

Republic Act No. 12289, signed last month by President Ferdinand R. Marcos, Jr., amended the Right-of-Way Act of 2016 to make property acquisition faster, more transparent, and predictable.

Under the new law, agencies and private concessionaires must make upfront deposits on properties slated for acquisition — including crops, trees, and improvements — equivalent to 15% of their market value.

“By standardizing compensation and requiring upfront deposits, both landowners and developers gain greater transparency and security,” said Jamie S. Dela Cruz, research manager at KMC Savills.

“For the property sector, this translates into clearer growth corridors and faster value appreciation in areas near planned infrastructure,” she added.

“Developers, investors, and businesses can plan with more certainty, while landowners benefit from more predictable compensation.”

Joey Roi H. Bondoc, director and head of research at Colliers Philippines, said the amended RoW Act will support real estate expansion outside Metro Manila.

“You cannot achieve both infrastructure implementation and decentralization if you cannot acquire the properties needed to build infrastructure,” he said.

Analysts have noted developers’ growing interest in regional areas such as Pampanga, Cebu, Bacolod, and Davao, amid favorable economic conditions and talent pools.

However, Ms. Dela Cruz cautioned that uneven implementation at the local level and potential speculative price surges in acquisition areas remain risks.

Right-of-way bottlenecks have long hindered infrastructure projects, affecting property developers’ expansion plans.

Beyond solving RoW bottlenecks, the government should strengthen urban planning and zoning to prevent congestion and ensure that infrastructure projects support balanced growth, she said.

She also stressed the need for more efficient permits, land titling, and property registration, as well as affordable housing for middle-income and working-class households.

“It should also ensure that public-private partnerships in key growth areas align infrastructure with commercial, industrial, and residential demand,” she added.

“If these issues are addressed together, the ARROW Act could become a genuine catalyst not only for infrastructure delivery but also for a more competitive, resilient, and inclusive Philippine property market,” Ms. Dela Cruz said.

Source: Business World

Infrastructure spending slumps in July amid flood control mess

Infrastructure spending declined by 25% in July, amid sluggish disbursements by the Department of Public Works and Highways (DPWH), the Budget department said.

At the same time, Budget Secretary Amenah F. Pangandaman said infrastructure disbursements may remain subdued in the coming months amid the ongoing probe into anomalous flood control projects.

In its latest disbursement report on Thursday, the Department of Budget and Management (DBM) said expenditures on infrastructure and other capital outlays fell by 25.3% to P93.3 billion in July from P124.9 billion in the same month last year.

Month on month, it dropped by 37.3% from P123.8 billion spent on infrastructure in June. 

This marked a reversal of the 6.5% annual increase seen in June after the election ban on public works disbursements was lifted in early May.

The DBM attributed the year-on-year decline in infrastructure spending to weak disbursements by the DPWH, which is currently embroiled in a controversy over anomalous flood control projects.

The Budget department noted the slow DPWH disbursements were due to project implementation schedules, including the timing and phasing of infrastructure activities, as well as delays in procurement, incomplete submission of progress billings and required documents by contractors.

Spending in July was also affected by contractors’ compliance with the new tax clearance requirement of the Bureau of Internal Revenue (BIR) for the release of final payments.

The BIR earlier said the failure of contractors to present their tax clearance will result in the suspension of contract settlements and the imposition of a tax line over the contract amount in favor of the government.

The updated clearance guarantees that every contractor has no outstanding tax liabilities.

“Disbursements for the Revised Armed Forces of the Philippines Modernization Program (RAFPMP) of the DND (Department of Defense) were also lower in July 2025 attributed to the timing of releases, as big-ticket items were scheduled in August,” the DBM said.

At the same time, the DBM said lower spending was partly offset by higher disbursements from the Department of Transportation, driven by local counterpart funding for foreign-assisted projects and the settlement of outstanding payables.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the government should exercise caution to prevent anomalies and corruption allegations.

“However, other infrastructure projects in good order will continue,” he said.

For the January-to-July period, overall infrastructure and capital outlays disbursements slipped by 3.2% to P713.5 billion from P736.7 billion in the same period last year.

The decline was driven by combined factors, including the second-quarter election-related ban and timing of disbursements for the defense modernization program.

As of end-July, the DBM released P4.9 billion to the DPWH for nationwide classroom repairs, alongside P3.5 billion earmarked for the restoration of Gabaldon and other heritage school and the implementation of the Last Mile Schools Program.

‘TEMPORARY SLOWDOWN’

Meanwhile, Ms. Pangandaman said infrastructure spending this year was dented by the election ban, and now the ongoing investigation on flood control projects.

The Budget department warned of a temporary slowdown in infrastructure spending as the DPWH conducts tighter due diligence of projects.

“(This) following rigorous due diligence being undertaken by the DPWH to evaluate and validate status of completed projects, and employ measures to enforce stricter verification of progress billings and other payment claims,” the DBM said.

Earlier this month, the DPWH suspended the bidding of all locally funded projects for two weeks, to help the agency implement safeguards against so-called “ghost” projects.

“The DPWH has also since lifted the suspension of bidding and procurement activities for local projects to ensure continuity and timely implementation of the infrastructure program while implementing safeguards to prevent corruption and ensure compliance with existing laws, rules, and regulations,” the Budget department said.

“Infrastructure spending will hopefully normalize and catch up towards the latter part of the year.”

However, Ms. Pangandaman said it’s too early to tell if the infrastructure slowdown will dent economic growth.

“We’re working with the DBCC (Development Budget Coordination Committee) to crunch the numbers. We’ll know more after the next (DBCC) meeting,” she said.

Analysts said they expect spending to further cool until 2026 amid a widening probe on infrastructure projects.

“We may see even slower infra spending in the coming months amid scrutiny of the DPWH and the corruption scandal,” Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said.

Ateneo Center for Economic Research and Development Director Ser Percival K. Peña-Reyes said the flood control scandal is a “very hot issue” that’s likely to cool infrastructure spending through yearend.

Mr. Ricafort also said slower infrastructure spending could also dampen government spending, which contributes less than a fifth to the country’s economic output.

“Risk is slowdown in infrastructure spending and overall economic growth. But would help narrow the budget deficit and curb growth in overall NG (National Government) debt,” he said.

Source: Business World