Flood Control Scandal Drenches Philippines' Economic Growth In 2025

Scandal's Ripple Effect on Economic Growth

The Philippines' economy faced a significant setback in 2025, all thanks to a scandal swirling around flood control projects. This controversy forced an unexpected pause in public infrastructure spending, according to the nation's chief economist. With the public construction sector facing a sharp contraction in the fourth quarter, the economy lost a crucial 2.2 percentage points, as highlighted by Department of Economy, Planning and Development (DEPDev) Secretary Arsenio Balisacan.

“The sharp contraction caused by the corruption scandal cost us around 1.1 percentage points in GDP growth,” he said.

Economic Targets Missed

GDP growth, the measure that reflects the total value of goods and services produced, slipped to a sluggish 3% in the October–December 2025 timeframe, dipping below a revised 3.9% from the previous quarter. This dip contributed to a full-year GDP growth of just 4.4%, failing to meet the Marcos administration's aspirations of between 5.5% and 6.5%. This marks the third year running that the Philippines has missed its economic growth targets, with GDP figures of 5.7% in 2024 and 5.5% in 2023 also falling short of expectations.

The Industry Sector's Struggles

Data from the Philippine Statistics Authority laid bare the struggles within the industry sector, which saw a 0.9% contraction in the last quarter of 2025. The construction sector, in particular, took a hit with a 7.1% decline, and general government capital formation in construction plummeted by a staggering 41.9%.

A Necessary Slowdown for Long-term Stability

Balisacan has portrayed the slowdown as a vital pause to ensure the economy's long-term stability, emphasizing the need to tackle corruption head-on. "As the President mentioned, it cannot be business as usual," he remarked. While growth might have been faster without the scandal, Balisacan questions whether that would have led to truly sustainable development.

Ensuring Inclusive Growth

He further elaborated that addressing corruption is crucial to ensuring that future economic growth benefits all. "Without addressing corruption, economic gains become concentrated, and opportunities for the poor are lost," Balisacan warned, suggesting that unchecked corruption could have diverted public funds into luxury expenditures, benefiting only a select few at the expense of broader societal gains.

The scandal's impact on the flood control projects stands as a stark reminder of the importance of transparency and accountability in driving genuine and inclusive economic progress.