The massive corruption scandal involving “ghost” flood control projects has cast a shadow over what has otherwise been a period of substantial infrastructure progress in the Philippines, according to London-based think tank Capital Economics.

In an Oct. 9 report, Capital Economics senior Asia economist Gareth Leather said the controversy has raised governance concerns that threaten to undermine confidence in the government’s infrastructure program.

The report noted that the Philippines has seen significant improvements in roads, ports, and digital connectivity over the past decade, enhancing competitiveness and supporting its goal of becoming a regional manufacturing hub.

“Poor infrastructure has long been a constraint on growth in the Philippines,” the think tank said, explaining that it raises transport and logistics costs, deters investment, holds back productivity, and makes it more expensive for domestic firms to reach overseas markets.

“The tide has begun to turn. The country has made significant headway over the past decade or so in addressing this critical bottleneck,” the think tank added.

“The recent corruption scandal involving flood control projects has dealt a blow to confidence in the government’s infrastructure agenda,” the report said, although it acknowledged that “there have been real, tangible improvements on the ground.”

Capital Economics also said the country’s infrastructure drive began under the Benigno Aquino III administration from 2010 to 2016, accelerated under President Rodrigo R. Duterte’s “Build, Build, Build” program from 2016 to 2022, and has been sustained under President Ferdinand R. Marcos Jr. through the “Build Better More” initiative.

The think tank also noted that infrastructure spending rose sharply from just 1.8 percent of gross domestic product (GDP) in 2010 to more than five percent by 2017 and has generally remained around that level since.

It added that the Marcos Jr. administration aims to sustain this high level of investment, keeping infrastructure a central pillar of its growth strategy.

Capital Economics said that enhanced infrastructure, along with a young population and widespread English proficiency, gives the Philippines a strong basis for sustained growth and competitiveness.

Still, it warned that without addressing corruption and governance issues, the country may struggle to realize its full economic potential and to keep pace with regional peers such as Vietnam and India.

Citing the World Bank’s (WB) logistics performance index (LPI), the think tank noted that the Philippines’ global ranking improved from 65th in 2007 to 43rd in 2023, placing it fourth in the Association of Southeast Asian Nations (ASEAN) after Singapore, Malaysia, and Thailand.

Capital Economics further noted that since 2010, the Philippines’ expressway network has expanded by about 60 percent, while internet usage has grown from 27 percent of the population to over 83 percent as of 2025. The rail network has more than doubled in size over the past 15 years, with further plans to double it again by 2030.

The report also highlighted improvements in port efficiency. “Philippine ports handle cargo far more efficiently than a decade ago, with average import clearance times dropping from nearly 11 days to six to eight days," it said, noting that it's because of investments in digital systems and infrastructure upgrades.

As Manila Bulletin reported earlier, the national government (NG) is projected to breach the ₱2-trillion mark in infrastructure spending by 2029, but its share to GDP is seen at just 5.2 percent—lower than last year’s 5.8 percent and the planned 5.3 percent for 2025.

According to the Cabinet-level Development Budget Coordination Committee’s (DBCC) 2025 Midyear Report, published last month, infrastructure spending will reach ₱2.03 trillion in 2029 and further increase to ₱2.2 trillion in 2030, both at 5.2 percent of GDP.

Infrastructure spending is expected to hit ₱1.51 trillion this year, ₱1.56 trillion next year (5.1 percent of GDP), ₱1.69 trillion in 2027 (5.1 percent), and ₱1.9 trillion in 2028 (5.2 percent).

In nominal terms, GDP is projected to post a value of ₱28.36 trillion this year, ₱30.85 trillion in 2026, ₱33.46 trillion in 2027, ₱36.3 trillion in 2028, ₱39.25 trillion in 2029, and ₱42.58 trillion in 2030.

To recall, the government had programmed ₱419.9 billion in infrastructure spending for the third quarter of 2025, the largest quarterly disbursement for the year.

The NG’s quarterly fiscal program, approved by the DBCC last June, showed that following ₱317.5 billion in infrastructure spending in the first quarter, higher disbursements of ₱400.5 billion and ₱374.9 billion are targeted for the second and fourth quarters, respectively.

Based on historical DBCC data, the third-quarter infrastructure spending plan is the second-highest quarterly allotment ever, only exceeded by the ₱421.3-billion infrastructure program for the second quarter of 2024.

The DBCC defines the infrastructure program as inclusive of the NG’s infra disbursements, infrastructure components of subsidy and equity to government-owned and/or -controlled corporations (GOCCs), and transfers to local government units (LGUs).

However, expenditures on infrastructure and other capital outlays in July dropped by 25.3 percent to ₱93.3 billion from ₱124.9 billion in the same month last year due to slower spending by the Department of Public Works and Highways (DPWH), the latest Department of Budget and Management (DBM) data showed.

Infrastructure spending last July also declined by 37.3 percent from ₱148.8 billion in June.

(Ricardo M. Austria)