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

Philippines lags behind SEA peers in digital government readiness

The Philippines continues to trail several of its Southeast Asian peers in digital government readiness, reflecting uneven progress in the country’s push to modernize public services through technology.

In the Organisation for Economic Co-operation and Development’s (OECD) latest Digital Government Index (DGI), the Philippines scored 0.28 out of 1. The country ranked third-lowest among the eight Southeast Asian countries that the study covered.

The OECD’s DGI draws on data from Brunei, Cambodia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam, collected between September 2024 and February 2025.

The index was presented in Government at a Glance: Southeast Asia 2025 in cooperation with the Asian Development Bank.

This placed the Philippines below the regional average of 0.37. The Southeast Asian average itself lags the OECD member-country average of 0.61.

“Governments can improve their agility and policy impact by putting digital transformation at the heart of modernization efforts,” OECD said.

The index benchmarks how governments integrate digital technologies and data into policymaking and public service delivery across six dimensions. These are digital by design, data-driven public sector, government as a platform, open by default, user-driven services and proactiveness.

The Philippines recorded a low score of 0.36 in “digital by design,” also placing it third lowest among its regional peers.

This suggests that while digital initiatives exist, they are not yet consistently built into the core design of government operations.

“Setting a strategic vision and clear mandate for digital government is a prerequisite to steer digital government initiatives, and for facilitating more effective and inclusive cross-sector collaboration,” the OECD said.

The group added that all of its surveyed Southeast Asian countries have a mandated government institution or formal coordination body on digital government.

For its part, the Philippines, through the Department of Information and Communications Technology of the Philippines, has developed a National ICT Government Agenda and a Digital Government Masterplan for 2023 until 2028.

4th highest

The Philippines also ranked fourth-highest in proactiveness, with a score of 0.26. The OECD said this could be further improved through the adoption of artificial intelligence (AI), an area where Southeast Asia as a whole continues to lag.

“The adoption of AI can help governments become more proactive. Used strategically and responsibly, governments can leverage AI to enhance public sector productivity, responsiveness and accountability,” the OECD said.

Only three countries in the region currently have a national strategy or agenda that references the use of AI in the public sector, including the Philippines, according to the report.

However, the OECD said the Philippines has yet to deploy AI systems in government operations and does not have binding or non-binding instruments in place to guide the responsible use of algorithms in the public sector.

At the regional level, the Association of Southeast Asian Nations published a guide on AI governance and ethics last year to support member states in developing common principles and safeguards.

More recently, President Marcos Jr. said the Philippines should fully utilize AI to help drive national development, including through legislation, signaling potential policy momentum in the coming years.

Mr. Marcos also approved in May the National Artificial Intelligence Strategy for the Philippines. The Department of Science and Technology initiated this effort.

Report:

OECD (2025), Government at a Glance 2025, OECD Publishing, Paris, https://doi.org/10.1787/0efd0bcd-en.

Source: Inquirer

Philippines edges up in rule of law

The Philippines inched up three places to 97^th out of 143 countries and jurisdictions in the 2025 edition of the World Justice Project’s (WJP) Rule of Law Index. It was the country’s best ranking in five years. However, it remained one of the laggards in the region.

Source: Business World