The “floodgate” scandal is hampering potential avenues for Philippine economic development, according to Bank of the Philippine Islands (BPI) Lead Economist Jun Neri.
In a report published on 12 November 2025, Neri cited several risks and potential solutions to support long-term economic growth — all of which have yet to be addressed as the government remains preoccupied with the ongoing fallout from the ghost flood control projects.
“Unless action is taken to restore confidence and fix government spending, economic growth may continue to disappoint in the near term,” he said.
Neri said the recent Q3 Gross Domestic Product (GDP) growth rate of 4.0% — the slowest pace since 2011 excluding the pandemic years — was largely due to a drop-off in public construction spending, which fell 26.2% during the quarter, shaving around 1.3% off GDP growth.
“Beyond the direct hit to government spending, the issue may dampen business and consumer sentiment further, discouraging them from spending amid expectations of slower growth,” he added.
He noted that the country has been far too reliant on consumption, as well as remittances from Overseas Filipino Workers (OFWs) and business process outsourcing (BPOs) as its main drivers of GDP growth. These sectors, he said, are now being threatened by rapid developments in artificial intelligence, as well as the United States — where over 3.3 million Filipinos called home as of 2023 — tightening its immigration policies.
Neri also observed that while the Philippine economy has been expanding, the country remains behind most of its ASEAN peers in terms of GDP per capita, or the average economic output per person.
“At the current growth rate, it would take the Philippines 2 years to catch up with the GDP per capita of Vietnam, 4 years with Indonesia, 14 years with Thailand, 26 years with Malaysia, and 70 years with Singapore, assuming their incomes remain stagnant,” said Neri. He added that the Philippines had a higher GDP per capita than Vietnam prior to the COVID-19 pandemic, but has since been overtaken following the latter nation’s widespread economic developments.
“At current trends, it would take the Philippines 2 years to catch up with Vietnam, but that gap could increase to 13 years by 2044,” he added.
Neri called for government reforms to address these risks, including shifting the focus of economic growth away from consumption and more toward production development in the manufacturing and agriculture sectors. However, the economist noted that the “floodgate” controversy remains the primary obstacle, and implementing such remedies will be difficult amid “a lack of focus.”
“Public spending issues divert fiscal resources and policymaking focus away from long-term development priorities. Efforts to strengthen safeguards against potential issues in government spending are essential, enabling the country to work on structural reforms that could improve the economy,” he added.
In the short run, Neri said the country will rely on monetary policy, dictated by the Bangko Sentral ng Pilipinas (BSP), “to sustain economic activity amid the constraints in fiscal spending.” He noted, however, that any potential rate cuts from the BSP — which eased its lending rates in October and will likely continue to ease its policy stance in 2026 — are simply a temporary fix.
“Excessive rate cuts could lead to an overshoot, as monetary policy might be used disproportionately to compensate for weaker growth performance,” added Neri. “If the BSP cuts its rates too much and inflationary pressures suddenly rise, the central bank could be forced to reverse course abruptly, hiking rates faster than the ideal pace.”
Neri underscored the need for the government to take decisive action to address the flood control scandal in order for its attention to be fully invested in long-term growth.
“The data [seems] to suggest that the flood control issue may have affected the economy, and the risk is that the full effect has yet to materialize. Without decisive action, the fallout could further drag growth in the coming quarters,” he said.
“Monetary easing may provide temporary support, but sustained progress will depend on addressing the underlying issues related to public spending and the country’s economic model. Only through reforms can the Philippines achieve faster growth that will narrow its economic gap with regional peers.”