Reforms in public infrastructure spending are expected to weigh on the Philippine economy in the short term, but strong domestic demand and rising consumer spending across Southeast Asia will likely sustain growth momentum, an Asian Development Bank (ADB) economist said Thursday.
ADB regional lead economist James Villafuerte said the country is poised for a general economic recovery despite temporary weakness in public investment.
Speaking before members of the European Natiobal Chambers during their first economic briefing since the pandemic, Villafuerte said stricter oversight and tighter scrutiny of government projects have slowed public-sector procurement but would improve long-term investment efficiency.
“Stricter oversight led to lower public sector procurement, but private construction partly mitigated the downturn. Without that support, the decline in growth performance would have been larger,” Villafuerte said.
The ADB maintains a 5.3-percent growth forecast for the Philippine economy in 2026. Villafuerte expects public infrastructure spending to remain soft for about four quarters, especially in the first two quarters as reforms are implemented within the Department of Public Works and Highways and adjustments are made to budget processes.
Despite the temporary slowdown, the economist maintained a positive outlook due to strong domestic demand across Southeast Asia where a growing middle class continues to support consumption-led growth.
He also pointed to rising global demand for digital products and artificial intelligence, which helped drive Philippine export growth last year.
Services exports, particularly from the business process management sector, remain a strong growth driver alongside semiconductor shipments and processed agricultural products.
The ADB economist also noted that improving labor market conditions across the region, including low unemployment and rising wages, are further supporting economic expansion.
Villafuerte said ongoing government reforms to improve the investment climate, including efforts to reduce red tape, expand digital government services and strengthen regulatory transparency. The ADB is providing policy-based support and technical assistance for these initiatives.
“If the government fails to strengthen efficiency, transparency and good governance in public investment, the Philippines risks missing key growth opportunities,” Villafuerte said, adding that governance and institutional reforms are critical to sustaining growth.
He said that maintaining strong macroeconomic fundamentals, including proactive monetary policy and fiscal consolidation, will help the country navigate global uncertainty and sustain long-term growth.
