The Manila Times
THE Middle East war and the lingering effects of the flood control bribery scandal drove economic growth to a five-year low, the Philippine Statistics Authority (PSA) said Thursday, adding future targets would be lowered. Gross domestic product (GDP) expanded 2.8 percent for the three months to March, sharply down from the 5.4 percent in the same period last year, the PSA said. It was also a dip from the 3-percent growth registered in the final quarter of 2025, the agency said. “Our growth performance trails Vietnam, Indonesia and China, among others, in the region,” Economic Planning Secretary Arsenio Balisacan told a news conference. “We definitely will move our growth targets lower... given the situation, especially [with] the global uncertainty remaining highly elevated,” he said. Balisacan blamed the weak growth on the Middle East conflict, a scandal involving billions of pesos in fraudulent state-funded flood control projects and the delayed approval of the national budget, which hampered infrastructure projects. The bogus flood control projects, believed to have cost taxpayers billions of pesos, sparked protests and arrests across the storm-battered country this year. Consumer prices also spiked to a three-year high of 7.2 percent for the quarter, which Balisacan called a “major factor” leading to the lowered GDP growth. “Addressing corruption firmly and transparently is essential to rebuilding confidence among businesses, investors and consumers alike,” he said. Excluding the pandemic years, economic growth in the first quarter was the lowest since the first three months of 2021, National Statistician Dennis Mapa said Thursday. Manila’s economic managers will meet next week to review their targets, Balisacan said. The government in December revised downward its 2026 GDP target to 5-6 percent — from 6-7 percent. Capital formation down Data showed that capital formation contracted by 3.3 percent in the first quarter, markedly down from last year’s 18.7 percent. Government spending also dropped to 3.0 percent from January to March 2025’s 5.3 percent. “The delays in the passage and subsequent release of the 2026 national budget slowed the rollout of critical government programs and infrastructure projects,” Balisacan said. “Third and foremost, the conflict in the Middle East, which escalated toward the end of February, triggered higher global oil prices and renewed supply chain pressures, creating additional risks for oil-importing economies such as the Philippines,” Balisacan said. Meanwhile, household spending also dropped to 3 percent from 5.3 percent last year. Major economic sectors also recorded slower growth during the period, with industry contracting to 0.1 percent from 4.6-percent growth in the same period in 2025. Agriculture, forestry and fishing also contracted to 0.2 percent from 2.2 percent. Services also dropped to 4.5 percent from last year’s 6.2 percent. “The lingering effects of oil prices and supply chain disruptions will persist in the coming months. So there are continuing challenges ahead,” Balisacan said. “Restoring public trust and strengthening institutional credibility remain among the Marcos administration’s highest priorities,” he added. Growth target to be revised Given the first-quarter growth slump, Balisacan said the economic managers are scheduled to meet next week and might revisit their macroeconomic assumptions. The Development Budget Coordination Committee has set a 5.0- to 6.0-percent growth target for this year. However, Balisacan said they might revise it downward amid the local and global headwinds. He argued that they “don’t expect to achieve the kind of growth that we expected to happen a year ago given recent developments.” “We definitely will move our targets lower because given the situation, especially the global uncertainty remaining highly elevated, our pre-Middle East conflict assumptions would no longer hold,” he added. Balisacan told reporters that potential growth remained at 6.0 percent, however, this becomes more challenging to attain given the conditions globally. “Our program is dynamic in the sense that we have to adjust when situations change. You can’t keep persisting and something that’s no longer attainable,” Balisacan said. “The world has changed so much since last year. So we have to reflect that in our growth assumptions among other considerations,” he added.
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