Quantifying the economic fallout of the corruption scandal

MY CUP OF LIBERTY BIENVENIDO S. OPLAS, JR.

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The ongoing Philippines corruption scandal revolving around flood control and other projects in the Department of Public Works and Highways (DPWH) surfaced last July when prolonged habagat or southwest monsoon rains poured for over two weeks and flooded many provinces and cities in the country.

This resulted in a quick negative economic impact. GDP growth in 2025 quickly declined from 5.5% in the first two quarters (Q1-Q2) to 4% in Q3. The Bangko Sentral has projected Q4 growth of only 3.8%. If this comes true, then the Philippines' full year growth would be 4.7%, lower than 2024's growth of 5.7%.

I want to estimate the Philippines' short-term growth slowdown for 2026, and possibly 2027, based on the trends and experiences of our East Asian neighbors that also had political scandals and instability recently (see Table 1). This piece is bordering 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 case of massive multi-billion dollar corruption where former Prime Minister Najib Razak was accused of channeling approximately $700 million from 1MDB into his personal bank accounts. The impact was historic — the 2018 general election ended 61 years of single-coalition rule.