TeaThe ongoing corruption scandal in the Philippines involving flood control and other projects in the Department of Public Works and Highways (DPWH) came to light last July. habagat or southwest monsoon rains that lasted for more than two weeks and caused flooding in many provinces and cities across the country.
This resulted in immediate negative economic impacts. GDP growth in 2025 slowed from 5.5% in the first two quarters (Q1-Q2) to 4% in Q3. The Bangko Sentral forecasts growth of only 3.8% in the fourth quarter. If true, the Philippines' full-year growth would be 4.7%, lower than the 5.7% growth projected for 2024.
I would like to estimate the Philippines' short-term growth recession for 2026 and possibly 2027 based on the trends and experiences of its East Asian neighbors, where there were also recent political scandals and instability (See Table 1This piece is based on political analysis, which is not my field, so I will limit my political commentary and focus on economic growth trends.
Malaysia experienced a three-year-long political crisis with the 1Malaysia Development Berhad (1MDB) scandal, a massive multibillion-dollar corruption case where former Prime Minister Najib Razak was accused of diverting approximately $700 million from 1MDB to his personal bank accounts. The impact was historic – the 2018 general election ended 61 years of single-coalition rule.
Thailand experienced another military coup in 2014, and the coup leader, General Prayut Chan-o-cha, led the country for nearly nine years, during which there was a severe slowdown in growth.
In 2014, Indonesia changed leadership through elections and it was highly divisive. The slowdown in its growth was mild. In 2015, President Joko Widodo faced pressure from his own party (PDI-P) chairwoman and former President Megawati Sukarnoputri.
South Korean President Yun Suk Yeol declared martial law in December 2024 – the second time the country has been under martial law since 1980 (although, counting from 2024, South Korea had been under martial law 17 times since the founding of the republic in 1948). The martial law of 2024 was very short-lived, ending after a few hours. The political reaction was severe and the slowdown in growth was also severe.
Vietnam has recently had internal strife, with two presidents resigning in the past two years.
And Japan welcomed its first female Prime Minister, Sanae Takaichi, just last October.
The numbers in Table 1 show that economic recovery occurs when instability resolves or is resolved within a year. When instability lasts for two to three years or more, an economic recession occurs.
In the Philippines, two possible scenarios could emerge from the current situation: a.) A quick resolution of the current corruption scandal, say in 12 months (July 2025-June 2026); And, b.) it took almost three years to resolve the 1MDB type scam.
If If it is (A), it would be like an economic recovery from the political instability of Vietnam and Japan, and GDP growth could potentially recover from 4.7% in 2025 and rise again to about 5.7% in 2026.
If it is (b), it would be like Malaysia's 1MDB scandal, which would lead to further instability and drag growth down to about 4.5% in 2026. The fiscal deficit so far has been low as spending has slowed while revenues have seen improvement (See Table 2,
I hope and wish that scenario (A) will happen. So the challenge now is for the mandated agencies – like the Independent Commission on Infrastructure or its successor bodies (to be created by law), the Ombudsman, and other constitutional bodies – to come up with strong evidence and cases against some of the “big fishes” who have been named and implicated, thereby landing them in jail. Then let this serve as a lesson so that corruption at this level does not happen again.
The remaining population – both public and private sectors – must continue their hard productive work. Keep producing more goods and services honestly – this will create more jobs and further industrialize the country.
Meanwhile, while the new Executive Secretary oversees various departments, note the media silence on the intense work going on behind the scenes. Then focus on swift action by the Finance Department on red tape and corruption in audits and authorization letters. and frequent presidential communication of new projects and policy reforms.
The three high-level secretaries, as well as other secretaries and officials, have been carrying out rapid confidence-building work in the economy. These lead to new confidence in business, governance reforms, non-wasteful spending, and non-tax growth, revenue expansion and reduction in public debt.
Bienvenido S. Opalas, Jr. Bienvenido S. Opalas, Jr. is president of Research Consultancy Services and Minimal Government Thinkers. He is an international fellow of the Tholos Foundation.
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