Philippines’ finance chief says anti-graft drive could slow economy

MANILA – Philippine Finance Secretary Ralph Recto warned that the government’s anti-corruption drive on infrastructure projects could slow the country’s economic growth until early 2026.

President Ferdinand Marcos Jr’s efforts to ensure that the budget is spent properly could hurt the economy – one of the fastest-growing in the region – in the second half of 2025 until the first quarter of 2026, Mr Recto said during a Senate hearing for his agency’s budget on Oct 14.

“It’s possible that there would be a slowdown in economic growth because of the slowdown in government spending,” said Mr Recto, a member of the central bank’s rate-setting Monetary Board.

The Bangko Sentral ng Pilipinas last week cut its benchmark interest rate as a deepening graft scandal dampened the economic outlook.

Some economists have lowered growth projections for 2025 to reflect a likely slowdown in state spending, which accounts for about a fifth of output. The nation’s gross domestic product grew 5.5 per cent in the second quarter, the lower end of the government’s full-year target of up to 6.5 per cent.

Mr Marcos in July exposed corruption in flood-control projects worth billions of pesos. Officials said many of the projects were either substandard or non-existent, triggering probes that have implicated several lawmakers, who have denied wrongdoing.

Mr Marcos’ cousin – former House Speaker Martin Romualdez who has denied taking bribes from such projects – appeared before an independent investigating body on Oct 14 and vowed to cooperate. 

“The President himself is the whistleblower of this controversy. And his message is clear: We will never turn a blind eye to corruption,” Mr Recto told the Senate hearing.

“The recent flood control controversy may have cast a shadow on public spending, but this is the start of a cleanup, and we only see upside over the next few months,” he said.

Reforming state spending would set the country toward faster growth, according to Mr Recto. “The economy can easily grow anywhere from 6 per cent to 7 per cent,” he said, but also cautioned that geopolitical issues, including US-China trade tensions, present external risks to the Philippine economy. Bloomberg