THE Philippine economy could remain under pressure as governance issues involving infrastructure projects continue to hamper public spending, ANZ Research said.
“The Philippines’ outlook is more constrained by weak household and business confidence, elevated inflation, and higher interest rates,” ANZ said in a report.
“Public spending likely bottomed in Q1 2026, but a material recovery is unlikely until governance issues surrounding infrastructure projects are fully resolved,” it added.
ANZ, which said the Philippines faced a more constrained economic environment compared to some regional peers, expects growth to slow to 3.9 percent this year — within the government’s downwardly revised 3.5- to 4.5-percent target — from 4.4 percent in 2025.
It was forecast to fall below potential at 5.0 and 5.5 percent next year and in 2028.
Public spending has long served as a key pillar of economic growth in the Philippines, ANZ noted, supporting domestic demand through infrastructure development, construction activity and job creation.
With the unresolved infrastructure issues, however, the outlook was said to be “less sanguine.”
Government spending rebounded in the first quarter, growing by 4.8 percent after slowing to just 0.4 percent in the last three months of 2025, but it was markedly slower compared to the 18.7-percent surge seen in January-March last year.
Infrastructure disbursements have yet to recover, however, as tighter review procedures implemented in the wake of last year’s massive flood control project scandal continued to weigh on project execution and payment processing.
Latest Department of Budget and Management (DBM) data showed that as of end-April, infrastructure and other capital outlays had dropped by 45.6 percent to P189.3 billion from P347.6 billion.
Overall infrastructure disbursements — which include estimated infrastructure expenditures as well as infrastructure-related subsidies, equity infusions to government-owned and -controlled corporations and transfers to local governments — declined by 28.4 percent to P300.4 billion from P419.4 billion.
“Infrastructure spending this year is yet to recover following the flood control corruption issues last year,” the DBM said.
“Progress billings for the period were not significant as most projects are being completed, while the turnaround time for processing of payments was extended due to review procedures,” it added.
ANZ, meanwhile, also expects inflation to remain above target, which could prompt the Bangko Sentral ng Pilipinas (BSP) to hike rates further, potentially impacting growth.
It is expected to remain above the 2.0- to 4.0-percent target at 6.2 percent this year before easing to 4.8 percent and 4.1 percent in 2027 and 2028, respectively.
It added that the Philippines was “unique in the current tightening cycle as... monetary policy dynamics are not backed by strong growth.”
“The Philippines’ central bank is squarely focused on alleviating inflation despite sub-par growth,” it added.
The BSP raised key interest rates by another quarter-point last week, bringing the policy rate to 4.75 percent, and ANZ said it expected two more 25-basis-point hikes to follow.
