THE government’s push to root out corruption in infrastructure projects could take a toll on economic momentum, causing the country to miss its growth target and dampen tax revenue collections, according to Finance Secretary Ralph G. Recto.
On the sidelines of the Department of Finance’s budget hearing before the Senate Committee on Finance on Tuesday, Recto said the economy could expand below the lower end of the government’s target of 5.5 percent.
‘We could miss it-the 5.5 percent. We could hit 5.4 percent,’ Recto said.
The economy could slow down due to slower government spending, Recto said, with the impact to be felt in the second half of the year and extend into the first quarter of 2026.
‘The good news is, moving forward, all of that is on the upside because we are solving the problem [on infrastructure projects]. So moving forward, you will realize your full potential for growth,’ Recto said.
The Development Budget Coordination Committee (DBCC) has lowered the country’s growth target to 5.5 to 6.5 percent this year, down from the range of 6 to 8 percent, due to heightened global uncertainties.
The possible slowdown in economic growth, however, could also weigh on the government’s revenue collection, Recto said.
‘Once you miss your GDP (gross domestic product) growth, naturally it affects your revenue target or tax revenues,’ Recto said.
Taxes to be collected by the country’s main revenue-collecting agencies will also fall short of the targets set by the government this year.
‘They will miss their targets a bit,’ Recto said, referring to the Bureaus of Internal Revenue (BIR) and Customs (BOC), which will collect P3.219 trillion and P958.7 billion, respectively.
Geopolitical tensions
Recto said geopolitical tensions with China, as well as between China and the United States, also spell external headwinds to the government’s revenue collections.
‘There are many global challenges that we’re facing today. And naturally, if you have a global economic slowdown, it will also affect the collections of BOC,’ Recto added.
The Philippines itself is facing new tariffs from the US, which would make exports more expensive and less competitive in the American market, potentially reducing exports and worsening the current account balance, Recto added.
Despite the impact on tax collections, Recto said non-tax revenues will make up for the shortfall as this is projected to reach P350 billion this year.
This would still enable the government to hit its P4.520 trillion revenue target for the year.
With expectations of slower economic growth and revenue collection, Recto said the government has prepared a catch-up plan that prioritizes the accelerated implementation of projects with high multiplier effects.
Recto said the government is supporting the rehabilitation and reconstruction of damaged infrastructure, as well as providing temporary employment to those displaced or affected by recent calamities.
Top priority projects of the government also include education, agriculture, health and information, communications and technology.
‘Our approach is anticipatory and strategic, ensuring that available fiscal space is directed toward high-impact, fast-disbursing projects to counteract the potential growth slowdown and help keep full-year GDP growth within the DBCC assumptions,’ Recto said.
‘We only see upside over the next few months as the major government cleanup concerning the flood control controversy will lead to stronger institutions, better governance and faster growth,’ he added.