The intensifying corruption scandal in the country could drag on both short- and long-term economic growth if left unresolved, the Organization for Economic Cooperation and Development (OECD) warned.

“In the short term, the corruption scandal is, of course, weighing on growth,” said Cyrille Schwellnus, head of Indonesia and the Philippines desk at OECD during the Paris-based organization’s presentation of its outlook for the world economy with a special focus on Southeast Asia on Wednesday, Dec. 3.

Schwellnus noted that the deepening investigation has led to tighter oversight of contractors, while public officials may be hesitant to launch new projects. “There will be very stringent controls in the short term,” he added.

He emphasized that addressing the corruption scandal and improving transparency in public procurement is crucial.

In the long term, he said, “If the scandal is addressed in a rigorous way and public procurement becomes more transparent, then this is actually an opportunity to improve the investment climate in the Philippines and can actually help to raise growth in the long term.”

“So, in the short term it will weigh on growth, but if the scandal is resolved in a rigorous way, then there might actually be a payoff in the long term,” he added.

He also emphasized that the corruption scandal has already impacted economic activity in the third quarter of 2025, particularly through a sharp decline in public construction, describing it as a significant setback for the Philippines.

The third-quarter gross domestic product (GDP) growth of four percent was the slowest quarterly expansion in 4.5 years, mainly as government spending on public goods and services was tempered following the infrastructure corruption scandal involving billions of pesos worth of “ghost” and substandard flood-control projects.

“We were expecting much higher growth in the third quarter, and this lower [third-quarter] growth will bring down annual growth for 2025, but also annual growth for 2026,” Schwellnus said.

“Now, the question really is for the forecast, whether and how quickly public investment will rebound and how quickly also investor confidence will rebound,” he added.

In a Dec. 2 report, OECD projected that the country’s economic expansion is expected to fall short of the government’s targets, with growth projected at 4.7 percent in 2025, 5.1 percent in 2026, and 5.8 percent in 2027, even as household consumption remains robust.

“In our projections, we assume that the corruption scandal will be resolved relatively quickly... with the restoration of more transparent public procurement. And if that is the case, indeed, we see growth gradually returning to trend in our projections,” Schwellnus said.

OECD’s forecasts are below the government’s GDP already downscaled growth target for 2025 of 5.5 to 6.5 percent, and six to seven percent for 2026 to 2028.

(Ricardo M. Austria)