Philippines infrastructure spending extends decline as August outlays fall

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Philippines infrastructure spending fall

Highlights

Infrastructure and other capital outlays fell 16.9% year on year to P70.5 billion in August, marking the 14th consecutive annual decline.
Infrastructure spending in the first eight months reached P522 billion, down 34.6% from P798.4 billion a year earlier, achieving only 56.04% of the full-year P931.54 billion target.
Weak infrastructure spending, hindered by tighter procurement, operational bottlenecks, and flooding, is projected to weigh on 2026 GDP growth and employment, with H1 growth at 2.6% below the 3.5%-4.5% target.

August slump deepens budget execution pressure

As reported by BusinessWorld Online, Department of Budget and Management data show infrastructure and other capital outlays fell 16.9% year on year, or P14.4 billion, to P70.5 billion in August from P84.9 billion a year earlier.

The August result marks the 14th consecutive month of annual declines in infrastructure spending. The downtrend started in July 2025, after President Ferdinand R. Marcos, Jr. raised concerns over substandard and allegedly nonexistent flood control projects and ordered a nationwide audit and review.

On a month-on-month basis, infrastructure spending drops 21.3% from P89.6 billion in July. The DBM says the decline reflects slower disbursements by the Department of Public Works and Highways, ongoing bidding for some projects, and P10 billion in checks issued to contractors and suppliers that have yet to be encashed.

The department also says flooding across parts of Luzon in August slows construction activity for road infrastructure and rail transport projects. For the third quarter, the government has programmed P251.3 billion in infrastructure and other capital outlays, meaning it needs to disburse P91.2 billion in September after combined July and August spending of P160.1 billion.

Growth risks mount as full-year target comes into question

Infrastructure and other capital outlays in the first eight months total P522 billion, down 34.6% from P798.4 billion in the same period a year earlier. The DBM says lower DPWH disbursements reflect tighter procurement compliance, stronger oversight of ongoing projects, payment-claim verification and contractor documentation checks aimed at protecting the integrity of public infrastructure spending.

Ser Percival K. Peña-Reyes, senior research fellow at the Ateneo Center for Economic Research and Development, says tighter reviews have delayed procurement, contract awards and contractor payments, while right-of-way issues and limited agency execution capacity add to the slowdown. Marco Antonio C. Agonia, economist at the University of Asia and the Pacific, says operational bottlenecks including right-of-way acquisition, procurement lags, cash-flow delays and weak absorptive capacity continue to constrain outlays.

At end-August, the government has achieved 86.55% of its nine-month target of P603.1 billion, leaving P81.1 billion to be disbursed in September. That is also only 56.04% of the full-year programmed P931.54 billion, leaving P409.5 billion to be spent in the final four months, or an average of P102.4 billion a month, compared with P65.3 billion in January to August.

The two economists say weak infrastructure spending is likely to weigh on gross capital formation and broader economic growth in 2026. Agonia says the economy will likely miss its growth target for 2026 unless public infrastructure spending rebounds noticeably, while Peña-Reyes says prolonged underspending could also drag on employment and private investment.

The economy grows 2.3% in the April-to-June period, bringing first-half growth to 2.6%. That remains below the government’s 3.5% to 4.5% target for the year.

In our previous report on planned reforms to the Philippine peso government bond market and the country’s expected inclusion in a major emerging-market bond index in early 2027, we explained how these steps could broaden the investor base and improve liquidity. We also noted that cheaper funding and stronger inflows are not automatic, and that the economic payoff depends on fiscal credibility and, crucially, on turning any borrowing advantage into well-selected, efficiently executed public investment—especially infrastructure—rather than delayed or poorly managed projects.

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