Governance issues linked to corruption can undermine investor confidence and weaken the effectiveness of economic reforms, according to the World Bank.

In its Global Economic Prospects report for January 2026, the World Bank flagged persistent governance concerns as a key obstacle to the Philippines’ economic development entering the year.

“In the Philippines, planned structural reforms are likely to boost investment and productivity, but concerns around governance remain,” the World Bank said.

The Philippines has rolled out several initiatives aimed at improving the ease of doing business and attracting foreign investment, partly to offset the impact of tariffs imposed by the Trump administration.

The Securities and Exchange Commission (SEC) recently implemented reforms to streamline business registration and compliance, including the ZERO and eSPARC platforms for fully online company registration, new digital monitoring systems, stricter service timelines with deemed approvals, and simplified fees and processes to reduce red tape.

Other measures include the approval of 99-year lease arrangements and expanded tax incentives under the CREATE MORE law, both intended to attract greater foreign investment. The President’s recent visit to the United Arab Emirates (UAE) also resulted in the signing of the Comprehensive Economic Partnership Agreement (CEPA) on 13 January, marking the Philippines’ first free trade agreement in the Middle East.

However, the World Bank cautioned that such reforms risk being rendered ineffective if corruption issues are not decisively addressed. In the same report, it revised its forecasts for Philippine real gross domestic product (GDP) downward to 5.1 percent for 2025, from 5.3 percent in its June 2025 outlook, and to 5.3 percent for 2026, down by 0.1 percentage point.

The downgrades align with similar revisions by other multilateral lenders, including the Asian Development Bank (ADB) and the International Monetary Fund (IMF), which have cited the fallout from the flood control scandal as a drag on growth.

President Ferdinand R. Marcos Jr. and other senior officials earlier said several high-profile figures implicated in the flood control controversy would spend Christmas in jail – a deadline that has since passed with limited results. As of press time, only notorious contractor Sarah Discaya has been charged in connection with a single ghost flood control project in Davao Occidental.

The whereabouts of fugitive former congressman Zaldy Co and former Department of Public Works and Highways (DPWH) Secretary Manuel Bonoan, remain unknown. Other so-called “big fish,” such as alleged ‘kickback’ beneficiaries Jinggoy Estrada, Joel Villanueva, and Bong Revilla, remain uncharged. 

On a more positive note, World Bank data shows the Philippines is poised to become the third-fastest growing economy in East Asia in 2026, behind Mongolia and Vietnam. Growth in artificial intelligence–related industries has supported industrial output, with rising demand for semiconductor exports expected to extend into 2026.

Meanwhile, the Senate Blue Ribbon Committee is set to resume its probe into the floodgate scandal on Monday, 19 January. Current DPWH Secretary Vince Dizon is expected to testify before the Sandiganbayan at Co’s trial the following day.