Philippine infrastructure spending to stay below 5% of GDP as public investment recovery remains gradual

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Philippine infrastructure spending outlook

Highlights

Moody’s reports Philippine infrastructure spending will remain around 4% of GDP in the near term, below the 5% pre-pandemic level.
Department of Budget and Management data shows infrastructure spending fell 16.9% year on year to P70.5 billion in August, continuing a 14-month decline.
Moody’s projects Philippine GDP growth at 3.3% in 2024 and 5.1% in 2025, with recovery deemed gradual and a negative output gap persisting.

Moody’s outlook on spending and recovery

As reported by BusinessWorld, citing Moody’s Ratings, the Philippines is unlikely to lift public investment back above 5% of GDP in the near term even if disbursement execution improves. Young Kim, assistant vice-president for Moody’s Ratings’ Sovereign Risk Group, says the agency expects a broader recovery in public investment once the global energy shock fades and budget execution normalizes.

Kim says the government is targeting infrastructure spending of around 4% of GDP at least in the near term. He adds that policymakers are also looking to shift some spending toward social needs while drawing in more private investment through PPPs, particularly as changes to the PPP Code and other enacted reforms take effect.

Moody’s says a more credible recovery still depends on faster investment returns, lower energy costs and further improvements in the ease of doing business. The ratings agency maintains a stable outlook, but says interim risks to growth remain tilted to the downside after weaker growth last year and this year.

Budget data and wider economic implications

Recent government data show infrastructure spending continues to contract. Department of Budget and Management figures show infrastructure spending falls 16.9% year on year to P70.5 billion in August from P84.9 billion, marking the 14th straight month of decline.

In the first eight months of the year, infrastructure spending drops 34.6% year on year to P522 billion. The full-year program stands at P931.54 billion, down 15.1% from the P1.1 trillion actual infrastructure spending recorded in 2025, before rising 4.6% to a projected P974.48 billion next year.

Moody’s says the expected recovery in investment is gradual rather than sharp, partly because easing energy prices through 2027 and base effects are only beginning to support public spending. Kim says that rebound may still be insufficient to return the economy to full potential by next year, with a negative output gap expected to persist, although it could help growth reach the lower end of the government’s 2027 target.

The agency sees Philippine GDP growth at 3.3% this year, below the government’s 3.5% to 4.5% goal. It expects growth to average 5.1% next year, within the government’s 5% to 6% target range.

Our earlier article on the Philippines’ planned sovereign bond reforms and expected inclusion in J.P. Morgan’s Government Bond Index-EM explained how these steps could broaden the investor base and improve liquidity for peso government securities. It also stressed that market modernization alone won’t guarantee stronger business investment or productivity unless it is matched by credible fiscal policy and better use of any funding gains for well-executed infrastructure and other growth-supporting spending.

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