Gov’t ramps up infrastructure spending to revive economy, Palace says

MANILA, Philippines — The government will speed up infrastructure spending in the second half of the year, after cautious fund releases linked to questionable flood control projects contributed to slower economic growth, according to Malacañang.

Palace press officer Claire Castro said on Thursday that public spending had been restrained as government agencies, especially the Department of Public Works and Highways (DPWH), became extremely cautious in disbursing public funds after tighter rules were enforced following the multibillion flood control scandal last year.

“The government really needs to spend, especially on infrastructure,” Castro said. “Infrastructure spending declined because of the issues surrounding the flood control mess.Ω“

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According to Castro, the Department of Budget and Management (DBM) took a more conservative approach in spending last year to ensure funds were not immediately disbursed without careful review.

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“The government did not immediately spend. It carefully studied the projects and funds were not released hastily,” she said, noting that the cautious approach became one of the factors behind weaker economic growth.

Castro made the remarks after the Development Budget Coordination Committee (DBCC) slashed the Philippine economic growth target to 3.5 percent to 4.5 percent for 2026 following a sharp slowdown in the first quarter due to underspending and the ongoing Middle East war.

READ: DBCC cuts PH 2026 growth target to 3.5-4.5%

Economic Planning Secretary Arsenio Balisacan said the decision to lower the target from the previous 5-percent to 6-percent range was made despite expectations that economic conditions would improve in the latter half of the year.

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“We expect that the situation will improve in the second half. The second quarter is still a little problematic, in the sense that we still see some lag effects of the previous quarter and the last half of last year’s effects coming in,” Balisacan said.

Castro shared this outlook, as the government was expecting economic activity to improve in the second half of the year as infrastructure spending began to recover.

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“The government recognizes the recent external and domestic developments, including geopolitical uncertainties, and the need to strengthen governance and quality in infrastructure implementation, which require a measured policy response,” Budget Secretary Kim Robert de Leon said, as quoted by Castro.

“Looking ahead, the government intends to pursue strategic, high-quality public investments supported by stronger project preparation, integrated infrastructure master planning, and improved budget execution to sustain long-term growth,” he added.

First-quarter economic growth slowed further to 2.8 percent from 3 percent in the previous quarter after the economy was hit by a double whammy of higher oil prices triggered by the Middle East war and weaker public spending from the lingering graft probe constraints.

According to Balisacan, growth could have reached 3.8 percent had government spending proceeded as expected. Government expenditure growth slowed sharply to 4.8 percent in the first quarter from 18.7 percent a year earlier.

READ: PH infrastructure spending remained weak in April

Infrastructure and other capital outlays fell 45.6 percent to P189.3 billion in the January- April period from P347.6 billion in the comparable period a year ago, data from the DBM showed.

The agency attributed the decline to longer turnaround times for processing payments due to review procedures. It also said progress billings remained limited as many projects were nearing completion.

Public infrastructure spending also plunged 52 percent to P41.5 billion in April from P85.8 billion in the same month last year.

This marked the ninth consecutive month of decline following the eruption of the flood control corruption scandal in July last year.

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The DBM cited the contraction to the weak spending performance of the DPWH  as the implementation of its current year’s budget of  P504.3 billion, and the prior years’ projects have still not been completed, while the processing of payment claims undergoes stringent validation procedures. /atm