Philippines Targets Infrastructure-Led Growth

The Philippines is steering its recovery through construction cranes and fiscal recalibration. President Ferdinand Marcos Jr.’s administration has reaffirmed its commitment to infrastructure as the engine of medium-term growth, allocating nearly ₱2.1 trillion—about 5.5 % of GDP—for transport, energy, and digital projects in the 2026 national budget. The aim is twofold: expand productive capacity while tightening fiscal discipline to stabilise debt ratios that swelled during the pandemic stimulus era.

Public-works execution has improved, with flagship expressway, airport, and mass-transit projects nearing completion. The Department of Transportation reports an 18 % year-on-year rise in infrastructure disbursement, driven by Chinese, Japanese, and multilateral financing. Power-sector reforms are accelerating, particularly in LNG and renewables, as Manila seeks to close a projected 3 GW supply gap before 2027. These investments are expected to lift GDP growth to 6 % next year, even as global trade remains soft.

Fiscal consolidation, however, shadows the optimism. The deficit is projected to narrow to 5.1 % of GDP in 2026, but revenue targets rely heavily on the new VAT digital-collection system and the proposed Passive Income and Financial Intermediary Taxation Act. Implementation delays could widen the gap, forcing heavier borrowing. Sovereign yields on ten-year notes have eased to 6.4 %, yet real rates remain high, limiting fiscal room.

Inflation remains Manila’s immediate policy test. Headline CPI stands at 3.8 %, down from 6.1 % a year earlier, but food-supply shocks still drive volatility. The Bangko Sentral ng Pilipinas maintains the policy rate at 6.25 %, signalling caution even as regional peers pivot to easing. The PHPUSD trades near 57.0, stabilised by strong remittances and resilient service exports.

Markets are cautiously constructive. The PSEi Index has gained 3 % this quarter, supported by construction, utilities, and banks; credit-default-swap spreads tightened 12 basis points, reflecting improved sentiment. Still, private-sector participation in public projects remains thin, with bureaucratic delays and land-acquisition disputes curbing momentum.

For 2026, the Philippines’ success depends on whether “Build Better More” delivers tangible productivity gains without fuelling new fiscal stress. The blueprint is sound, the financing tight, and the clock ticking. Growth now hinges on concrete—literally.