Corruption concerns contributed to the sharp slowdown in Philippine economic growth last year by weakening investor confidence and delaying public investments, according to the World Bank.

In its latest Philippines Economic Update, the multilateral lender said governance concerns surrounding corruption contributed to delays in public investment and weighed on business confidence.

“Allegations of corruption led to increased scrutiny and audits of infrastructure projects from mid-2025, slowing public investment. This contributed to lower investment overall as private investors navigated growing global and domestic policy uncertainty.”

Slowdown continued to shape Phl outlook

The economy expanded by just 4.4 percent in 2025, a post-pandemic low, as weaker investment, natural disasters and governance concerns weighed on economic activity. The slowdown has continued to shape the country’s outlook, with the World Bank maintaining its 3.7-percent growth forecast for 2026.

The World Bank had already flagged the impact of the corruption controversy late last year, when it cut its 2025 growth forecast to 5.1 percent from 5.3 percent, citing weaker domestic investment and deteriorating investor sentiment. The government cited these same lingering issues, along with the onset of the national energy emergency in March, as key reasons for the continued weakness in growth during the first quarter of this year.

Sustained investment contraction

“The infrastructure probe transmitted through both public budgets and private confidence, producing a sustained investment contraction. Fixed capital formation contracted for three consecutive quarters from Q3 2025. Public capital outlays fell by 1.3 ppts of GDP from Q1 2025 to Q1 2026 as project controls tightened across government,” the World Bank said.

Foreign direct investment (FDI) also weakened significantly, while typhoons and floods disrupted economic activity. Services exports likewise slowed amid weaker business services and fewer tourist arrivals.

“FDI as a share of GDP fell in parallel as rising global and domestic policy uncertainty weighed on private sentiment. The result was a contraction in both public and private channels, each reinforcing the other.”

The lender said stronger execution of public infrastructure projects will be important to the economy’s recovery, alongside credible fiscal consolidation and reforms to improve competitiveness and encourage private investment.

Scandal largely unresolved

The scandal remains largely unresolved, with President Ferdinand R. Marcos Jr. last week in his State of the Nation Address vowing to pursue charges against former Speaker Martin Romualdez. Senators Rodante Marcoleta and Jinggoy Estrada remain detained at the Payatas Jail on charges related to alleged anomalies in flood control projects.