THE UNRESOLVED flood control scandal coupled by geopolitical and economic uncertainties in the world will continue to drag Philippine economic growth which could fall below 4 percent.
According to Nomura Global Markets, the hundreds of billions flood control scandal alone affected government spending and dampened consumption and sentiment (both business and consumer).
“I think going forward, these spillover effects (from the graft scandal) will also expand,” Business World quoted Nomura ASEAN chief economist Euben Paracuelles in the program Money Talks with Cathy Yang on One News yesterday.
The scandal, which curbed state spending last year, is expected to dampen household consumption and business investment amid weaker sentiment, he added.
“If the drag is now sort of becoming more broad-based, not just the drop in government spending, you’ll see growth coming potentially below 4%, at least in the near term,” he said.
WITHIN THE TARGET
Nomura said it expects the gross domestic product (GDP) to expand by 5.3 percent in 2026 (from 5.6 percent previously) which is still within the government’s recently-revised 5 to 6 percent target this 2026.
Economic Secretary Arsenio Balisacan earlier said growth targets were lowered through 2027, after GDP growth slowed to 4.8 to 5 percent in 2025 amid the flood control controversy.
The government cut its 2026 projection to 5 to 6 percent and to 5.5 to 6.5 percent for 2027 from the earlier 6 to 7 percent range. The 2028 target was retained at 6 to 7 percent.
Paracuelles anticipates that the government will roll out catch-up spending plans, possibly in the second half of the year.
RATING UPGRADE
Notwithstanding such obstacles, the Philippines may earn a credit rating upgrade if the government manages to resolve the flood control corruption issue within a year, Paracuelles said.
“The key for me is 12 months from here, when they need to decide on whether they need to upgrade the Philippines, I think it’s still quite uncertain,” he said.
“If, at that point there will be some resolution to the corruption scandal, they could potentially upgrade the Philippines to ‘A-,’ right? But on the other hand, if there’s still no clarity, they could potentially — the risk I see is from ‘positive,’ we go back to ‘stable,’” he added.
DERAILED BY FIASCO
Last year, former Finance Secretary Ralph Recto said the multibillion-peso flood control corruption mess may have derailed the country’s chances of earning a credit rating upgrade from S&P Global Ratings.
S&P said it kept its long-term “BBB+” and short-term “A-2” credit ratings on the Philippines, as well as its “positive” outlook.
A positive outlook means the Philippines’ credit rating could be raised over the next two years if improvements are sustained.
MOVING SIDEWAYS
Economic Undersecretary Rosemarie Edillion hinted at the peso moving “sideways” after hitting a fresh low on January 7.
“It really depends on what’s happening in the US as well versus what’s happening with our country. I think right now with the recent move of the US, everybody’s still weighing in. Is this a good or a bad thing?” she said in the same program on Thursday.
“Others will still adopt a wait-and-see attitude over the next few days,” she added.