“Without a strong industrial backbone, the economy risks overdependence on services, which cannot fully absorb employment demand or provide the production base for global competitiveness,” Federation of Philippine Industries (FPI) chair Beth Lee said.
THE DISMAL GROSS domestic product (GDP) growth in the third quarter and for full-year 2025 laid bare the government’s persistent failures, exposing deep cracks in governance in the Philippines that, if left unaddressed, will inevitably drag the economy down further.
The Philippine Statistics Authority (PSA) reported that full-year gross domestic product (GDP) growth slumped to a disappointing 4.4 percent this year, sharply down from the 5.7 percent recorded in 2025.
Meanwhile, fourth-quarter GDP growth fell to a weak 3 percent, a clear deterioration from the 3.9 percent posted in the previous quarter.
Clearly, the flood control scandal was a major contributor to the economic slide, and it should have compelled the current administration to decisively jail those responsible instead of allowing impunity to persist.
“Admittedly, the flood control corruption scandal also weighed on business and consumer confidence,” Department of Economy, Planning and Development (DEPDev) Secretary Arsenio Balisacan said Thursday.
“Public and private construction, as well as private consumption were particularly affected during [the fourth quarter],” he added.
At the same time, the dismal performance of the Philippine industrial sector stems from the chronic failure of past administrations to establish incentives, infrastructure, and other critical measures needed to attract foreign investments and fast-track industrialization.
“Without a strong industrial backbone, the economy risks overdependence on services, which cannot fully absorb employment demand or provide the production base for global competitiveness,” Federation of Philippine Industries (FPI) chair Beth Lee said.
“Revitalizing Industry means making our factories, construction sites, and energy systems resilient to shocks and capable of delivering inclusive growth nationwide,” she said.
Beyond the flood control scandal, Balisacan blamed the slowdown on weather- and climate-related disruptions and global economic uncertainties that further weakened construction activity and private consumption. Domestic demand growth crawled to just 0.7 percent in the fourth quarter, while full-year expansion reached a lackluster 3.7 percent.
As a result, Balisacan underscored the urgent need to restore investor and consumer confidence through governance reforms, tougher accountability, better project quality, and a more disciplined use of public funds.
He also pointed to the necessity of strengthening disaster preparedness, early warning systems, and the operational capacity of the state weather bureau.
On infrastructure, he said the government would rush the completion of ongoing projects while tightening anti-corruption safeguards to prop up economic recovery and pursue more sustainable growth.
“These reforms protect public funds, strengthen our institutions, build a more resilient, inclusive economy, and ultimately, rebuild trust between government and the people we serve,” Balisacan said.
INDUSTRIAL REVIVAL NEEDED
For her part, Lee emphasized the pressing need to revive the industry sector, especially manufacturing, which eked out a mere 2.5 percent growth last year, driven largely by consumer goods demand and automotive-related activities.
Lee said the contraction of the industry sector last year “reveals structural weaknesses in construction, mining, and utilities” — sectors that are crucial for job creation, infrastructure expansion, and energy security.
She added that “the numbers underscore the urgent need to strengthen the country’s industrial base to secure resilience and competitiveness.”
Meanwhile, the Philippine Institute for Development Studies (PIDS) has repeatedly pointed out that the country’s services sector is dominated by low value-adding activities such as retail.
“The statistics are stark. While the services sector has been the main driver of economic growth, with a 6.3-percent growth in the first quarter of 2025, it is largely comprised of low-value-added activities such as wholesale and retail trade, repair of cars and motorcycles, and financial and insurance activities,” PIDS said in a statement in June last year.
“These sectors, although important, do not have the same potential for growth and job creation as a robust manufacturing sector,” it added.
However, the current administration’s lukewarm and inconsistent support for the Revitalizing the Automotive Industry for Competitiveness Enhancement (RACE) sends a confusing and counterproductive signal about its supposed commitment to industrialization.
Funding for RACE was stripped under the General Appropriations Act for 2026, with talks are ongoing to reinstate it using the Department of Trade and Industry’s budget.
This hesitation is baffling, considering that the automotive industry is globally recognized as a powerful job generator, where a single job in a car factory can create up to 10 indirect jobs.
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