MANILA: The Philippines' economic growth slowed sharply in the third quarter, missing market expectations, as a "shocking" corruption scandal linked to government infrastructure projects hammered consumer and investor confidence.
Gross domestic product grew 4.0 per cent in the third quarter from a year earlier, well below the 5.2 per cent forecast in a Reuters poll and significantly weaker than the 5.5 per cent expansion recorded in the previous quarter, the statistics agency said.
The weaker-than-expected performance, combined with subdued inflation, has increased the likelihood of a fifth straight interest rate cut at the central bank's policy meeting in December.
Economic Planning Secretary Arsenio Balisacan acknowledged that achieving even the lower end of the government's 5.5 to 6.5 per cent growth target for the year will be difficult.
"The productive capacity that we had wanted to happen was muted by all this corruption," Balisacan said at a press briefing. "It's just so shocking to see how extensive it was."
Authorities are currently investigating allegations of corruption involving infrastructure projects, particularly flawed flood-control facilities, in a scandal that has shaken the graft-weary nation.
The probe has implicated several government officials and lawmakers, raising concerns about the integrity of public spending and further eroding investor sentiment.
Public spending rose 5.8 per cent year-on-year in the third quarter, its slowest pace since the same period in 2024, as stricter validation procedures delayed the release of funds for government projects.
Government spending on infrastructure contracted by 26.2 per cent, the worst in nearly 14 years as stricter measures were enforced to curb misuse of funds.
Household consumption, a key growth driver, grew only 4.1 per cent, its weakest since the first quarter of 2021, as consumers deferred major purchases, particularly of durable goods.
Adding to the slowdown, the country is also grappling with a series of natural disasters, including a super typhoon, which disrupted economic activity and infrastructure in parts of the country during the quarter.
"The third quarter's performance reminds us of the urgent need to address key challenges and strengthen our foundations for rapid, sustained, and inclusive growth,” Balisacan said.
On a seasonally adjusted basis, GDP expanded 0.4 per cent quarter-on-quarter, below the 0.8 per cent median forecast in a Reuters survey of economists. - Reuters
