The spillover effects of the floodgate scandal will continue to weigh on the Philippines’ economic growth in the first half of the new year, according to Department of Economy, Planning, and Development (DepDev) Secretary Arsenio Balisacan.

In a Monday morning press conference at Malacañang, Balisacan said the slowdown in economic growth brought about by the flood control scandal will persist heading into 2026.

“The developments last year are likely to be faced this year,” he said. “So we expect [economic growth] perhaps in the first quarter, or at least in the first half [of 2026] to be not quite as rosy as we would want it to be,” Balisacan added.

The DepDev chief noted that the growth scenario for 2025 is around 4.8 to 5.0 percent – under the Marcos administration’s target range of 5.5 to 6.5 percent, marking the third consecutive year the Philippines has missed its growth targets under President Ferdinand R. Marcos Jr. 

Gross domestic product (GDP) growth sank to 4.0 percent in the third quarter of 2025 following a sharp decline in public infrastructure investment. Eli M. Remolona Jr., Governor of the Bangko Sentral ng Pilipinas, said in December that the central bank expects fourth-quarter GDP growth to be even lower at around 3.8 percent. Remolona has also said the slowdown could persist into the first half of 2026, with a recovery likely by the middle of the year.

The Development Budget Coordination Committee (DBCC), of which DepDev is a member, earlier set the Philippines’ GDP growth target for 2026 at 6.0 to 7.0 percent, a downward revision from the previous 6.5 to 8.0 percent range. Balisacan said the adjustment reflected both domestic and global developments.

“It arose from the realities that we saw, both globally and domestically,” said Balisacan. “While the global economic climate has improved a bit in the second half of last year, we haven't really gotten back to the kind of growth expected before April of last year.”

Despite the headwinds, Balisacan remained optimistic about a rebound in the second half of 2026, emphasizing the importance of inclusive growth.

“What makes this year and next and hopefully even further down, is that we are realizing that we want to happen and that is a growth that is not just fast but is more inclusive,” Balisacan said.

“[Focusing] on health, self-protection, job creation, that will tremendously improve inclusivity. And if you can improve inclusivity, you can have faster poverty reduction even without substantially raising growth.”

Balisacan made the remarks following the President’s signing of the 2026 national budget, which included the veto of P92.5 billion in unprogrammed appropriations amid heightened public scrutiny and calls for transparency.

According to the Department of Budget and Management (DBM), the education sector will receive the largest allocation in the approved budget at P1.345 trillion, equivalent to 4.36 percent of GDP.

Meanwhile, the healthcare sector will receive its highest budget level on record at P448.125 billion, which the DBM said will support zero-balance billing under universal healthcare, faster responses to disease outbreaks, and a stronger Philippine Health Insurance Corporation.