‘Weak infrastructure spending may prolong Philippines slowdown’

Manila, Philippines — The Philippines' economic downturn could persist into 2027 due to insufficient infrastructure spending, according to ANZ Research. In its latest Asia Economic Outlook, the bank warned that a reduced allocation for capital outlays would limit momentum for investment and household consumption recovery. ANZ economist Kausani Basak highlighted that planned infrastructure and long-term government asset spending will be P1.3 trillion for 2027, or 4% of GDP, marking the third year of consecutive declines in capital outlays relative to the economy.

"Even with pending funds from the 2026 budget, not enough infrastructure spending support will likely be missing in 2027," Basak cautioned. Though the Department of Budget and Management has released 99.5% of its budget to the Department of Public Works and Highways by August, this does not guarantee projects have been funded. Basak remains skeptical about the government's infrastructure spending revival in the second half of the year.

The report noted that government capital spending has been in contraction, with fixed capital formation down by 13.7% year-on-year in Q2. Household spending growth also slowed to 2.8% due to weakening wage growth. ANZ cited governance concerns as a key factor in driving consumer confidence to multi-year lows and rising unemployment to 6% in July, its highest level since 2022.

Even a higher minimum wage in Metro Manila may offer limited relief, as households may opt to save additional income due to heightened uncertainty. Basak emphasized that sustained recovery in government infrastructure spending will be crucial to restoring household consumption. ANZ forecasts Philippine economic growth of 3.5% this year and 5% in 2027, but warns of renewed price pressures from oil, rice, and El Niño conditions that could pressure inflation to average 6.2% this year and 5.2% in 2027, potentially requiring further rate hikes by the Bangko Sentral ng Pilipinas.