‘Politics, trade woes weigh down growth’

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December 30, 2025 | 12:00am

“Anti-corruption measures or reforms and policy priority of further improvement in governance standards must be taken seriously, as these remain the missing link to boost confidence among investors in the economy and financial markets.”

Corruption issues, disasters, tariffs limit economic momentum

MANILA, Philippines — Allegations of corruption in flood control projects and global trade tensions weighed on Philippine economic growth in 2025, underscoring the need for stronger governance and transparency to restore investor confidence in 2026, economists said.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said geopolitical tensions were among the biggest factors weighing on the economy this year, even as stronger anti-corruption measures have yet to be realized to rebuild investor confidence.

“Anti-corruption measures or reforms and policy priority of further improvement in governance standards must be taken seriously, as these remain the missing link to boost confidence among investors in the economy and financial markets,” he said.

Ricafort added that political noise, weather disruptions and earthquakes have been the major catalysts this year, including US President Donald Trump’s higher tariffs, trade wars and protectionist measures.

Finance Secretary Frederick Go earlier said the economic team is taking active steps to boost growth, create jobs and raise per capita earnings, expressing optimism that the Philippines could attain upper-middle income status as early as next year.

“I believe our economy will grow,” Go said.

Meanwhile, Philippine Institute for Development Studies senior research fellow John Paolo Rivera said that governance and corruption concerns matter since they erode confidence and the biggest gap this year was execution and credibility.

“There have been significant delays in public spending and weak follow-through on reforms limited the economy’s momentum, while persistent issues in food supply, logistics and disaster resilience kept household pressures elevated,” he said.

Economic losses from corruption in flood control projects may have reached more than P118 billion annually from 2023 to 2025, according to a Department of Finance report in September.

Without these losses, former finance secretary Ralph Recto said the economy could have expanded by as much as six percent.

Rivera noted that policies supporting digital payments, revenue administration and macroeconomic stability helped cushion the slowdown, while policy uncertainty and underspending undermined growth by weakening implementation predictability.

For Reyes Tacandong & Co. senior adviser Jonathan Ravelas, freedoms are eroded when public trust is betrayed.He said that amid corruption scandals, timing becomes critical because broken trust diminishes the impact of government action.

“A budget reenactment is like hitting pause when the economy needs play; it delays projects, slows growth and risks fiscal credibility,” he said.

Malacañang announced last week that President Marcos would sign the P6.793-trillion budget for 2026 in the first week of January, after a thorough review of the outlay approved by Congress.

With the expiration of the 2025 General Appropriations Act by Dec. 31, the current budget will be automatically reenacted.

The Department of Budget and Management had told The STAR that it is fully prepared to undertake all necessary fiscal and administrative adjustments if a reenactment of the proposed 2025 national budget becomes necessary.

On so-called “soft pork” or politicized aid in the budget, Ravelas said that while boosting subsidies may provide short-term relief, it acts like “sugar, not nutrition,” potentially undermining long-term productivity by diverting funds from critical investments in infrastructure and education.

“The smarter move is to channel resources into jobs, skills, and micro, small and medium enterprises. These build capacity, not dependency,” he said.