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THE PHILIPPINE ECONOMY might experience a deceleration until early 2026 as the dispute regarding irregular infrastructure projects diminishes government expenditures, Finance Secretary Ralph G. Recto stated on Tuesday.
During a Senate hearing for the Department of Finance budget, Mr. Recto mentioned that growth probably decreased in the third quarter as President Ferdinand R. Marcos, Jr. enacted reforms in light of the corruption scandal.
“This (deceleration) could extend until the first quarter of next year,” he commented. “The recent flood control controversy could have overshadowed public spending, yet this marks the beginning of a cleanup, and we foresee improvements in the coming months.”
In July, Mr. Marcos brought attention to irregularities in flood control initiatives and established the sumbongsapangulo.ph website, allowing citizens to report inadequate or nonexistent public projects.
“The President himself is the whistleblower in this matter. And his message is unequivocal: We will never ignore corruption,” Mr. Recto remarked.
The corruption scandal ignited inquiries by the Senate, the House of Representatives, the Justice department, and the newly established Independent Commission for Infrastructure. It also revived scrutiny over the Department of Public Works and Highways (DPWH), restricted infrastructure spending, and prompted a P255-billion reduction in the DPWH’s budget for 2026.
“Had a portion of the budget not been lost to corruption, the economy might have been expanding by around 6% to 6.2%, and revenue collections from the BIR (Bureau of Internal Revenue) and BoC (Bureau of Customs) would have been higher,” Mr. Recto noted.
Despite this, he remained optimistic that the economy would still achieve the lower end of the government’s 5.5% to 6.5% growth target this year.
In the first six months of the year, the nation’s gross domestic product (GDP) growth averaged 5.4%.
The Finance chief also pointed out that weather-related disturbances influenced economic activity in the third quarter.
“Our strategy is anticipatory and tactical, ensuring that available fiscal space is directed toward impactful, fast-disbursing projects to mitigate the potential growth slowdown and help maintain full-year GDP growth within the DBCC (Development Budget Coordination Committee) assumptions,” Mr. Recto remarked.
Mr. Recto stated it could take the government two to three quarters “at most” to resolve the flood control issue, but infrastructure spending will “certainly decline next year.”
Meanwhile, Economy Secretary Arsenio M. Balisacan mentioned that reaching the full-year growth objective has “become more difficult” due to a probable reduction in government expenditures and ongoing external challenges.
“However, we’ll await the publication of the third-quarter economic performance (in the first week of November) before the DBCC takes action,” he communicated to BusinessWorld via a Viber message on Tuesday.
The Philippine Statistics Authority will disclose first-quarter GDP figures on Nov. 7.
MORE RATE CUTS
Mr. Recto, a member of the Monetary Board, observed that further rate cuts would be “beneficial for the economy.”
“It all hinges on monitoring inflation. For now, it appears to be within target, and we have already lowered interest rates. Ideally, another rate cut,” he stated.
The Bangko Sentral ng Pilipinas (BSP) last week reduced its key policy rate by 25 basis points to 4.75% as it aimed to bolster economic growth as the corruption scandal clouds the outlook.
BSP Governor Eli M. Remolona, Jr. recently suggested the possibility of another reduction at the Dec. 11 meeting, with possibly more in the following year.
Mr. Recto remarked that the decline in global trade and the risk of a 100% US tariff on Chinese products will be considered in the BSP’s upcoming policy decision.
Meanwhile, the government remains on a path to achieve its revenue target this year, according to the Finance chief.
“We will achieve our revenue goals for the entire year. And our revenue-to-GDP ratio is increasing, we’re currently at approximately 16.5%,” Mr. Recto noted. “Clearly, the issue lies with expenditures, not with revenue.”
The government aims to collect P4.52 trillion this year, increasing to P4.98 billion in 2026, according to the 2026 Budget of Expenditures and Sources of Financing.
However, the BIR and BoC are projected to slightly miss their 2025 collection targets of P3.22 trillion and P958.7 billion, respectively.
Mr. Recto also indicated that the deceleration in economic growth and global uncertainties such as the increased US tariffs are impinging on revenue collection. — Aubrey Rose A. Inosante
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