Philippine economic growth slowed further at the start of 2026, extending last year’s second-half slump as the Marcos Jr. administration continues to grapple with domestic corruption issues and the global energy crisis.

At a Thursday press conference at the Philippine Statistics Authority headquarters in Quezon City, government officials reported gross domestic product (GDP) growth for the first quarter fell to 2.8 percent—0.2 percentage points lower than the already weak fourth-quarter 2025 rate and the slowest since the 1.8 percent growth recorded in the first quarter of 2021 at the height of the COVID-19 pandemic.

Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio Balisacan said the country lagged behind regional peers such as Indonesia, Vietnam, and China, noting the weak print reflects a combination of domestic and external headwinds.

“First, the lingering effects of the flood control corruption controversy weighed on consumer sentiment and business and investment confidence. Second, delays in the passage and release of the 2026 national budget slowed the rollout of critical government programs and infrastructure projects, particularly in public construction,” he said.

“Third and foremost, the conflict in the Middle East, which escalated toward the end of February, triggered higher global oil prices and renewed supply chain pressures, creating additional risks for oil-importing economies such as the Philippines,” Balisacan added.

With the latest data, the economy has now slowed for three consecutive quarters—a downtrend that began in July last year when the President flagged alleged anomalies in flood control projects nationwide. 

The still-unresolved “floodgate” scandal triggered a contraction in public infrastructure spending and eroded investor confidence, contributing to weaker-than-expected full-year 2025 GDP growth of 4.4 percent—the third straight year the current administration has missed its growth targets.

Balisacan earlier noted that the “sharp slowdown in public construction” shaved off 1.1 percentage points from GDP—equivalent to trillions of pesos in lost output. The probes into the genesis of the scandal also saw debates arise regarding the constitutionality of unprogrammed appropriations and discretionary funds, of which about P238 billion has been disbursed in response to the energy shock.

“Restoring public trust and strengthening institutional credibility remain among the Marcos administration's highest priorities,” said Balisacan. “Addressing corruption fairly and transparently is essential to rebuilding confidence among businesses, investors, and consumers alike.”

Most analysts, as well as the central bank, subsequently lowered their growth projections for the Philippines as a result of the controversy – which may influence an already-soured general investor sentiment, while also potentially impacting future monetary policy decisions and borrowing costs.

Compounding these domestic strains is the Middle East conflict, which has further destabilized the already fragile economic backdrop. Headline inflation surged to 7.2 percent in April—four times higher than end-2025 levels—driven by elevated fuel, transport, and food costs.

The Bangko Sentral ng Pilipinas (BSP), which had previously cut rates twice to support growth in the fallout of the graft scandal, was forced to reverse course and hike interest rates last month as inflationary pressures intensified—raising the risk of slower economic expansion and even weaker Filipino purchasing power ahead.

The conflict has also resulted in further reductions to domestic economic forecasts, worsening an already tempered Philippine economic outlook. Meanwhile,The government has rolled out stopgap measures to cushion the impact, including excise tax suspensions on LPG and jet fuel, mandated pump price cuts, and targeted support for transport and agriculture sectors. Total spending to combat the crisis could reach P429 billion if the conflict drags on through year-end—further straining public finances.

“We expect government spending and project implementation to accelerate in the coming months as agencies operationalize their cash-out programs,” Balisacan said, acknowledging that a downward revision of the Development Budget Coordination Committee (DBCC)'s 5 to 6 percent growth target is now a “foregone conclusion.”

The DBCC’s annual target growth range had previously been negatively revised in the fallout of the flood control scandal.

“Looking ahead, while global uncertainty remains elevated, we remain focused on strengthening the country’s economic foundations and regaining growth momentum in the coming quarters,” he added.

As of press time, fugitive ex-Solon Zaldy Co remains at large despite earlier reports from Malacañang he had been captured in the Czech Republic. Former Speaker Martin Romualdez and Senator Chiz Escudero have still not been formally charged, while former Senator and convicted plunderer Bong Revilla’s trial for an alleged ghost flood control project in Pandi, Bulacan has just commenced.