Philippine government infrastructure spending yields bigger economic gains when directed to less-developed regions, the ASEAN+3 Macroeconomic Research Office (AMRO) said, but governance and implementation capacity constraints must first be addressed to unleash this output potential.

“Targeting infrastructure spending toward less-developed regions would generate particularly high returns,” Singapore-based AMRO said in an analytical note titled “Local Fiscal Multipliers of Infrastructure Spending in the Philippines: Evidence from Regional Data,” published on Wednesday, March 11.

This suggests that areas with limited infrastructure tend to experience a stronger economic impact from fresh investment relative to regions that already have well-developed infrastructure.

AMRO, however, flagged the risk of failing to gain higher economic returns, as governance concerns have become a friction to growth.

It bears noting that the Philippines is still a center of flooding despite disbursing billions in flood-mitigating infrastructure. Recall that infrastructure spending was constricted in the latter part of 2025 following the eruption of the flood control corruption controversy.

AMRO said the country continues to face governance hurdles, including “rent-seeking behavior, fragile rule of law, and recent corruption scandals in public works projects.” These could reduce the economic gains of increased spending by local government units (LGUs).

“Realizing these high potential returns in infrastructure-poor regions requires addressing governance and implementation capacity constraints,” AMRO said, suggesting limited gains without these efforts.

AMRO noted that big-ticket infrastructure projects remain concentrated in Metro Manila and its surrounding regions, along with fast-growing areas in Visayas and Mindanao, such as Cebu and Davao. This reinforces the infrastructure disparities that have been observed historically.

According to AMRO, Metro Manila and Central Luzon still account for about a quarter of total project costs implemented by the national government (NG). Both regions are deemed relatively infrastructure-rich.

Given such a massive share being raked in by these regions, other regions across the Philippine archipelago are left to share the remaining funds.

Contrary to infrastructure-rich regions, infrastructure-poor ones are the less-developed areas that possess below-median levels of national road length per capita, reflecting massive gaps in basic connectivity.

These “infrastructure deficits” act as binding constraints or bottlenecks on local growth, but public spending in these areas has a powerful impact because it alleviates bottlenecks and “unlocks” stagnant private sector potential, AMRO said.

Recall that infrastructure spending continued to shrink in November 2025, as was seen in previous months, as the Marcos Jr. administration slashed the funds released to public works amid tighter scrutiny of flood control graft.

The latest data from the Department of Budget and Management (DBM) showed that the government significantly reduced its spending on infrastructure and capital outlays by 45.2 percent to ₱48 billion in November last year, from ₱87.6 billion during the same month in 2024.