Washington-based International Monetary Fund (IMF) urged the Philippines to resume public infrastructure spending under stricter governance standards to revive investor confidence, warning that the absence of accountable fiscal activity is stifling private investment and domestic growth.

In a statement to the Manila Bulletin, the Washington-based lender said that restoring public investment through accountable channels is essential to revitalizing the economy.

The multilateral lender further said that enhancing the rule of law and addressing corruption vulnerabilities would amplify fiscal multipliers, providing the necessary cushion for the economy as it grapples with regional instability

“Restarting public investment in an effective and accountable manner is critical for growth,” the IMF said.

“In addition, enhancing governance, improving the efficiency of public spending, strengthening the rule of law, and reducing corruption vulnerabilities could significantly raise private investment and fiscal multipliers, supporting growth and confidence,” it added.

Recall that the Philippine economy entered 2026 still reeling from controversies surrounding ghost infrastructure projects.

This resulted in a sweeping fiscal squeeze, most evident in infrastructure spending in the second half of 2025. Consequently, government projects saw stalled implementation.

Economic growth, in turn, became anemic in late 2025, dragging full-year gross domestic product (GDP) growth down to 4.4 percent, falling significantly short of the government’s minimum target of 5.5 percent.

Excluding the pandemic years, 2025 marked the weakest economic performance since 2011—a period reminiscent of the early term of Benigno S. Aquino III, whose aggressive anti-corruption campaign similarly constrained fiscal spending.

It was in the fourth quarter of 2025 when the narrative of the Philippines as the “sick man of Asia” resurfaced. Before long, American missiles struck Iranian territory, triggering a series of military hostilities that have persisted since flaring up in late February.

What was expected to be a period of recovery instead turned into a prolonged phase of uncertainty, gripping the domestic economy since March.

Last month, the IMF slashed its growth forecast for the Philippines to 4.1 percent from the previous 5.6 percent, citing mounting stagflationary pressures stemming from the Middle East conflict.

Meanwhile, Frankfurt-based Deutsche Bank expects the Philippine economy to remain muted at 3.3 percent from January to March, barely accelerating from the flat three percent growth in the previous quarter.

Meanwhile, think tank Moody’s Analytics sees a higher print at 3.9 percent, in contrast to Indonesia and Hong Kong, which are both expected to have slowed from the earlier quarter.

“While we expect some recovery in household consumption in the quarter, aggregate growth could be weighed down by high base effects from the frontloading of government spending in the first quarter of last year ahead of the May 2025 midterm elections,” Deutsche Bank said in a May 4 commentary.

According to the IMF, implementing reforms to improve spending efficiency, along with stronger tax reforms and collections, would greatly support the government’s plan to gradually trim debt and narrow the deficit over the medium term.

“Investment and productivity-enhancing reforms are critical to accelerate inclusive growth, diversify the economy, and enhance resilience,” the multilateral lender added.

Speaking of resilience, the local economy has been bearing the brunt of the global oil crisis, given its heavy exposure to oil price fluctuations. The domestic pass-through of fuel costs has reportedly been faster in the Philippines compared to its peers.

“Amid rising energy and food prices, fiscal policy should provide targeted, time-bound support to vulnerable households, while preserving price signals,” the IMF said.

Since the declaration of a national energy emergency, major fiscal measures rolled out include a surgical excise tax suspension on kerosene and liquefied petroleum gas (LPG), a move seen to save more than ₱40 billion in revenues to fund subsidies for vulnerable sectors, including jeepney drivers and farmers.

Deutsche Bank has projected the Philippines, alongside Thailand, to experience a continued surge in consumer prices in April, faster than in March. The German lender expects inflation to have accelerated by 5.5 percent last month, well above the Bangko Sentral ng Pilipinas (BSP) four-percent ceiling.

Heightened risks of elevated inflation, compounded by a weakening peso, have prompted Singapore-based DBS Bank Ltd. to anticipate another off-cycle policy meeting by monetary authorities—this time potentially delivering a rate hike.

DBS senior economist Radhika Rao now expects two more quarter-point hikes, with the first possibly as early as May, even as the next policy meeting is scheduled in June. If realized, these rate hikes could bring the benchmark rate to five percent by the end of 2026.