Even the best intentions can backfire.
President Ferdinand Marcos Jr.’s decision last year to expose alleged corruption in flood-control projects during his State of the Nation Address opened a Pandora’s box. The cleanup was necessary. The economic fallout, however, has been harder to contain.
Public works slowed sharply, and private construction is increasingly feeling the chill. For an economy already struggling to regain momentum, the timing could hardly be worse.
Before that SONA, Philippine economic growth had stayed above 5 percent since the third quarter of 2024. Then the brakes came on. Growth slipped to 4 percent in the third quarter of 2025, before skidding to just 2.3 percent in the second quarter of 2026.
Look at the latest numbers, and construction stands out like a warning light.
Industry contracted 2.4 percent, dragged down by a 13.9 percent decline in construction. Government construction plunged 32.4 percent, while gross capital formation, a broad measure of investment, fell 9.2 percent.
The flood-control controversy cannot be blamed for every lost percentage point. Economies are rarely that tidy. But it is becoming increasingly difficult to ignore its impact on one of the country’s most important growth engines.
Once Marcos put questionable projects under the spotlight, the government had little choice but to freeze, review, and scrutinize spending. That is precisely what should happen when public money may have been misused.
The problem is that a brake applied to corruption can also slow legitimate activity.
Construction is an ecosystem. When government projects stall, contractors delay purchases of cement, steel, and equipment. Workers lose hours. Suppliers and subcontractors lose orders.
Private developers and their investors, already bruised by the oversupply of residential and office space after the earlier SONA-led crackdown on Philippine Offshore Gaming Operators, have grown even more cautious as an increasingly opaque infrastructure pipeline makes investment decisions harder to time and justify.
That is where political cleanup collides with economic reality.
The irony is uncomfortable. A campaign designed to stop waste can create another form of waste through idle machinery, delayed projects, stranded capital, and economic activity that never gets started.
The answer is not to abandon the cleanup. It is to make it more surgical.
Projects that are corrupt or unjustifiable should be killed. Projects that are legitimate should be cleared quickly, with stronger safeguards and greater transparency. The government cannot afford to leave the entire construction pipeline in limbo while it hunts for bad actors.
There are bright spots. Services grew 4.5 percent, agriculture 2.7 percent, exports surged 12.2 percent, and manufacturing expanded 2.6 percent, powered by electronics and other industrial products. Government consumption also rose 8.3 percent.
But households are not exactly picking up the baton. In a consumer-driven economy, household spending is supposed to be one of the more dependable sources of momentum. Instead, it grew just 2.8 percent in the second quarter, well below the considerably healthier 5.2 percent pace recorded a year earlier.
That slowdown matters because it suggests the weakness is not confined to construction sites and government project offices. Consumers, too, are becoming less of a growth engine. A wage increase could give household spending a temporary lift, but stronger consumption will require more than a single policy boost. It will depend on whether households feel sufficiently secure about jobs, incomes, and the broader economy to open their wallets again.
The Bangko Sentral ng Pilipinas’ latest consumer confidence survey offers little solace. It shows Filipinos becoming more cautious, prioritizing essentials while saving less, borrowing less, and putting off major purchases amid rising prices, corruption concerns, and dimmer economic prospects.
The economy, in other words, is being squeezed from both ends.
Investment is faltering just as consumer demand loses some of its momentum.
The economy is not running out of engines. It is running short of them.
The flood-control reckoning could ultimately produce something valuable: cleaner government spending and better infrastructure. But reform has an economic price when it paralyzes everything around it.
The government’s next challenge is therefore not merely to clean up the pipeline. It is to unclog it.
Otherwise, the cost of fixing the system may be measured not only in pesos recovered, but in growth that never happened.
