‘Floodgate’ scandal haunts Marcos Jr. economy as growth sinks to 2.1 percent

Philippine economic growth slumped to 2.1 percent in the third quarter of 2026, marking the fifth consecutive quarter of decline in the country’s gross domestic product (GDP) growth rate since President Ferdinand R. Marcos Jr. turned whistleblower on his own administration’s widespread infrastructure kickback scandal, which continues to weigh on confidence in the Philippine economy amid the absence of a concrete resolution.

In a joint Monday morning press conference, the Philippine Statistics Authority (PSA) and the Department of Economy, Planning and Development (DEPDev) announced the third-quarter figures, which fell below many economists’ projections and marked the lowest growth rate since the fourth quarter of 2009, excluding the pandemic years.

DEPDev Secretary Arsenio Balisacan attributed the slump to three main factors: higher prices brought about by the Middle East conflict, weather disturbances during the rainy season, and a lingering decline in public investment following last year’s flood control scandal.

“The Middle East conflict raised fuel costs affecting transport, electricity, and production. Inflation of 7.8% in October underscores the continuing pressure on purchasing power,” he said.

“Public construction declined for the sixth consecutive quarter, although its contraction eased to 15.1% from 33.4%. Private construction barely expanded, while investment in durable equipment fell by 7.8%,” he added.

Household consumption, a major driver of Philippine economic growth, slowed to 2.4 percent from 2.9 percent in the previous quarter, as rising prices continued to erode purchasing power. Inflation reached a three-year high of 7.8 percent in October, while economists have also warned that the El Niño season poses additional risks to agricultural output and the inflation outlook.

“Inflation is still high, and I think even for November, inflation will continue to be challenged because of the lag effects of the previous increases in prices of goods and services coming from the fuel price increase,” Balisacan said.

Balisacan said the economy would need to grow by 6.3 percent in the fourth quarter for the government to meet its full-year GDP growth target of 3.5 to 4.5 percent, describing such a rebound as “challenging.” Failure to achieve the target would mark the fourth consecutive year the economy has missed its growth goals under the Marcos administration.

The DEPDev chief said growth of roughly 4 percent in the fourth quarter would already be “remarkable” given the current circumstances.

“We'd like to believe that the fourth quarter performance will be better. We need something like 4% to 4.5% or so to achieve at least 3%,” he said.

“I think if we can achieve that, that would be a remarkable achievement already, given that we are coming from a very low base of growth in the first three quarters.”

Balisacan acknowledged that governance concerns surrounding the flood control scandal continued to weigh on market confidence and public construction, with infrastructure and other capital outlays down 34.6 percent year-on-year from January to August.

He called for measures to address the infrastructure slump through greater transparency and efforts to restore confidence in the Philippine economy, which remains broadly pessimistic according to the latest surveys conducted by the central bank.

“Predictable policies, fiscal discipline, and credible institutions are essential to rebuilding confidence,” he said.

The scandal continues to cast a shadow over the Philippine economy, with governance concerns repeatedly cited by state officials as contributing to the five-quarter slowdown in GDP growth. While former Speaker Martin Romualdez, Senators Jinggoy Estrada and Rodante Marcoleta, among other high-profile figures, have been detained in connection with the controversy, the scandal remains without a concrete resolution, with no convictions as of press time.

Fugitive former lawmaker Zaldy Co, who tagged the President as the ultimate “mastermind” of the government-wide kickback scheme, remains at large. His last known whereabouts were reported around the same time inflation soared to 7.2 percent in April following the onset of the Gulf oil supply shock.

Asked whether the economy had drifted into stagflation—a period of low growth, high inflation and high unemployment—Balisacan said the assessment should be reserved until the end of the year.

“I think I would wait for the end of the year to think of stagflation,” he said.

“I think that it's important that we are looking at the various dimensions of the economy and just a few indicators.”