Floodgate fallout tempers Philippine business outlook

Overall business confidence posted a modest rebound in the fourth quarter of 2025, although longer-term economic prospects remain subdued amid the fallout from the floodgate scandal, according to the latest data from the Bangko Sentral ng Pilipinas (BSP).

In its Business Expectations Survey (BES) released on Friday, 19 December, the BSP said the overall business confidence index (CI) rose to 29.7 percent in the fourth quarter from 23.2 percent in the previous quarter, signaling improved optimism among businesses heading into 2026.

The central bank attributed the uptick to expectations of stronger holiday-season consumption, improved firm productivity and operational efficiency, the rollout of new products and services, and a favorable inflation environment.

The third quarter, however, was marked by a series of external shocks, including natural disasters and political uncertainty — much of which stemmed from the floodgate scandal. While business sentiment remains in positive territory, the BSP said it continues to be weighed down by apprehension as investigations into alleged graft and corruption in flood control projects persist.

“The lingering effects of the recent natural calamities, together with the negative impact of corruption allegations on investor and business sentiment, were cited as reasons that weighed down the outlook for the upcoming periods,” the BSP said.

The flood control scandal dragged third-quarter economic growth down to 4.0 percent, largely due to a contraction in public infrastructure spending. BSP Governor Eli M. Remolona Jr. said in an interview last week that fourth-quarter GDP growth is expected to slow further to 3.8 percent.

Longer-term indicators also reflect caution among businesses. While still positive, the CI for the first quarter of 2026 fell to 23.7 percent, down more than half from 49.5 percent in the previous survey. Similarly, the CI for the next 12 months declined to 40.4 percent from 48.1 percent.

With the Independent Commission for Infrastructure’s (ICI) proceedings suspended until 2026, the business sector continues to be affected by ongoing revelations related to the floodgate scandal. Former Department of Public Works and Highways Undersecretary Catalina Cabral, who had been implicated as the alleged “middleman” in flood control kickbacks, was found unconscious late last night and later pronounced dead.

In a recent interview on DAILY TRIBUNE’s Straight Talk, Batangas 1st District Representative Leandro Leviste claimed that “excess” P60 billion in funds from the Philippine Health Insurance Corporation (PhilHealth) were reallocated for budget insertions tied to flood control projects.

“There is debate on whether those [funds] then were used for DPWH projects. But unprogrammed appropriations were used for DPWH projects,” he said.

“So if you think that the funds are fungible, then to the extent that the funds went into unprogrammed appropriations, which were then used to fund DPWH projects, on that basis alone, you can say that the PhilHealth funds were used for DPWH projects,” Leviste added.

Meanwhile, the BSP also released the results of its Consumer Expectations Survey, which painted a contrasting picture. The central bank reported that the consumer confidence index plunged to -22.2 percent for the October-to-December period, a 12.4-point decline from the previous quarter, reflecting heightened consumer anxiety amid the flood control controversy.

The Philippine economy remains heavily reliant on household consumption, which accounted for 73 percent of GDP as of 2024. With Christmas Day approaching, businesses are hoping for a seasonal boost, as consumer spending typically peaks during the holidays — offering a rare bright spot in an otherwise challenging year.