THE ECONOMY may struggle to recover in the near term with fragile confidence continuing to dampen consumption, investment and public spending, says ANZ Research.
“We are not sure yet that growth in the Philippines will improve anytime soon,” Sanjay Mathur, ANZ Research’s economist for Southeast Asia and India, said in a report on Tuesday.
Mr. Mathur noted that corruption in flood management has hit consumer and business confidence more than just reducing government spending, especially on infrastructure projects.
“Management issues affecting public infrastructure projects have not only caused a significant decrease in government spending, but have also had an impact on businesses and households,” he said.
Last year, severe flooding led to the discovery of faulty or non-existent flood control systems. Testimony implicated Public Works officials, legislators, and private contractors in the rollback programs.
As a result, the growth of the domestic product (GDP) decreased in the second half of 2025.
GDP growth stabilized at 3.9% in the third quarter before slowing to 3% in the fourth quarter, bringing full-year growth down to 4.4% after the pandemic.
Economists have since acknowledged that governance concerns continue to worry investors and domestic sentiment.
“The share of companies that intend to increase investment has decreased, and households are at a lower economic level in the next 12 months,” said Mr. Mathur. “In fact, consumer confidence is lower now than it was during the violence.”
According to the Bangko Sentral ng Pilipinas’ (BSP) Business Expectations Survey, businesses were more optimistic in the fourth quarter, with their overall confidence index (CI) rising to 29.7% from 23.2% in the third quarter but down from 44.5% last year.
However, businesses turned sour in the first quarter with a CI of 23.7%.
Meanwhile, consumer confidence worsened in the fourth quarter, with its CI at -22.2% from -9.8% in the third quarter and -11.1% a year earlier.
This was the worst consumer opinion since the pandemic, when the consumer CI entered 24% in the fourth quarter of 2021.
Whether the government will be able to resume spending on infrastructure is also uncertain, said Mr. Mathur.
“We don’t know how quickly the use of infrastructure can be renewed,” he said.
“The last restructuring of public finances in 2001 led to a long period of low and stable public spending. It is not clear whether this will be the case or whether a quick resolution of administrative issues will occur,” he added.
Infrastructure spending fell for the fifth consecutive month in November, down 45.2% year-on-year to P48 billion.
Mr. Mathur said that the BSP may advance to improve the economy, although “weak confidence may limit its impact.”
“The growing financial situation is important in the current situation,” said Mr. Mathur.
The central bank has been on an easing cycle since August 2024, having delivered a total of 200 basis points (bps) of rate cuts.
Mr. Mathur expects the Monetary Board to cut the benchmark borrowing cost for the final time by 25 bps, which would bring the key policy rate to 4.25% from the current 4.5%.
BSP Governor Eli M. Remolona, Jr. he said the monetary authorities may relax again this month to help stimulate domestic demand, although the Monetary Board also noted that the end of the easing cycle is approaching.
The Monetary Board will hold its first policy meeting of the year on February 19. — Katherine K. Chan
