Even as the Philippines emerged as the most at-risk country globally, the government plans to scale back its total funding for climate adaptation measures in 2026, reducing it to less than three percent of the country’s overall output.

“Programmed climate change adaptation expenditure for 2025 amounts to 3.9 percent of gross domestic product (GDP), while proposed spending for 2026 is projected at 2.7 percent of GDP,” the International Monetary Fund (IMF) wrote in a report published last week.

Based on the National Climate Change Action Plan (NCCAP) strategic priorities, the government has proposed lowering its budget for climate change programs by 15 percent to ₱983 billion from ₱1.16 trillion in 2025.

Notably, it slashed planned adaptation spending by a quarter to ₱844 billion from ₱1.12 trillion in 2025, scaling back major items such as water sufficiency, climate-smart industries and services, and sustainable energy.

Mitigation measures—whose funding increased more than fourfold to ₱139.4 billion from ₱32.6 billion—failed to offset the massive drop in planned spending for adaptation.

This development runs counter to the government’s climate adaptation spending trend, which averaged 1.7 percent of GDP annually from 2022 through 2024, up from just one percent from 2015 through 2021.

According to the IMF, destructive typhoons reduce economic output in affected regions by about 0.4 percent, or up to 0.3 percent of the country’s total GDP. Meanwhile, farm workers’ productivity declines by 2.5 percent.

A World Bank report estimates that climate change could cost the Philippines up to 7.6 percent of GDP by 2030 and 13.6 percent by 2040 if no deliberate action is taken.

“The costs associated with adapting to climate-resilient infrastructure are not explicitly specified in the Climate Change Expenditure Tagging (CCET) and could potentially be large,” the Washington-based multilateral lender noted.

According to World Bank estimates, building new climate-resilient infrastructure would cost around 0.6 percent of GDP. The IMF said this figure is conservative, as it excludes the cost of upgrading existing structures.

As it stands, the Philippines has been cutting infrastructure spending, which includes the controversial “ghost” flood-control projects.

Infrastructure spending plummeted in November 2025 as the Marcos Jr. administration curtailed funding releases for public works projects amid an intensifying crackdown on corruption in flood-control programs.

Government outlays for infrastructure and capital projects shrank 45.2 percent to ₱48 billion in November from ₱87.6 billion in the same period in 2024. This steep decline reflected tighter fiscal controls as the Department of Public Works and Highways (DPWH) faced heightened scrutiny over corruption allegations.

Given the high cost of climate measures, the IMF warned that heavy reliance on borrowing to finance these efforts could make it more difficult for the government to meet its obligations.

“Relying solely on borrowing to finance resilient investment could increase the debt burden over time,” the IMF said, adding that it would complicate fiscal consolidation efforts in the medium term.

President Ferdinand R. Marcos Jr. aims to end his term in 2028 with a debt-to-GDP ratio of around 60 percent.

However, the administration appears to be moving further from this goal, as the latest debt report showed the ratio rose to 63.2 percent in 2025—the highest level since the 65.7 percent recorded in 2005.

“If the government chooses to invest in resilient infrastructure without incurring additional debt, revenue mobilization and/or expenditure rationalization may be required,” the IMF said. Finance Secretary Frederick D. Go has yet to disclose the government’s priority tax measures for this year.

Meanwhile, economic managers led by Go have trimmed government revenue targets for the current and succeeding years. The 2026 target was lowered to ₱4.82 trillion from ₱4.98 trillion, while the 2027 and 2028 targets were cut to ₱5.12 trillion and ₱5.57 trillion—down 4.5 percent and 5.9 percent from earlier projections, respectively.

“Creating fiscal space through stronger revenue mobilization and more efficient spending is therefore critical to financing resilience without increasing public debt,” the IMF said, adding that private investments channeled through public-private partnerships (PPPs) could serve as an alternative source of funding for climate-adaptive infrastructure.