Stable governance is essential for sustained economic growth, according to Philippine Institute for Development Studies (PIDS) Senior Research Fellow Dr. John Paolo Rivera.

Speaking at a webinar on Thursday, Rivera said good governance provides the strongest foundation for economic stability by restoring investor confidence.

“Good governance is the most powerful macroeconomic stabilizer. It attracts private investments without requiring additional public spending, it makes every peso work harder, and it restores confidence in uncertain times,” he said.

Investor confidence significantly hit

Investor confidence has taken a significant hit following the flood control scandal. The latest Bangko Sentral ng Pilipinas (BSP) survey says the business confidence index (CI) forecast for the first quarter of 2026 dropped to 23.7 percent, down sharply from 49.5 percent in the previous survey.

While a positive CI still indicates net optimism, the more than 50-percent decline underscores how fragile investor sentiment has become amid the fallout from the “Floodgate” scandal.

“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.

During the same webinar, Rivera presented PIDS’ revised growth forecasts, projecting 5.0 percent GDP growth in 2025 and 5.3 percent in 2026.

He noted that these estimates are “very much aligned” with the outlooks of the World Bank and the Asian Development Bank, both of which cited reduced infrastructure spending and governance concerns as reasons for cutting their projections.

Growth figures still respectable

Rivera said the revised growth figures could still be considered “respectable outcomes by regional standards.” The World Bank’s January 2026 Global Economic Prospects report noted that the Philippines is poised to be the third-fastest growing economy in East Asia, trailing only Mongolia and Vietnam.

“But as we all know, we remain below the economy’s pre-pandemic potential. While these figures signal stability, they do not yet tell us that economic transformation is happening,” Rivera said.

Resolving governance issues critical

PIDS thus joins the growing list of institutions projecting that the Philippines will miss its 2025 GDP growth target of 5.5 to 6.5 percent. Rivera stressed that while an economic rebound remains possible in 2026 — particularly in the second half — resolving governance issues is critical to restoring confidence.

“When governance is weak, shocks amplify, and when it is strong, the economy is able to absorb stress and, of course, recover faster,” he said.

Meanwhile, the Office of the Ombudsman announced on Friday the filing of malversation and graft charges against former Senator Bong Revilla and six officials of the Department of Public Works and Highways over an alleged anomalous infrastructure project in Pandi, Bulacan.