Go: Economy back on track by Q1

Finance Secretary Frederick D. Go is confident the economy will be back on track by the first quarter, once individuals linked to the flood control scandal are swiftly prosecuted.   

In a Dec. 18 briefing with reporters, Mr. Go said government revenues may rebound in early 2026, depending on the swift resolution of cases related to the corruption mess.

“If we’re able to successfully prosecute certain personalities, then the faster the effect will be on economic growth in the first quarter. But to me, I’m confident that we will get back on track in the first quarter,” he said.

In the third quarter, the country’s economic growth slumped to 4%, the slowest expansion seen in over four years. In the nine-month period, gross domestic product growth averaged 5%, below the government’s 5.5-6.5% target.   

A wide-scale controversy linking Public Works officials, lawmakers and private contractors to multibillion-peso corruption in anomalous flood control projects dragged government spending and consumption.

“The whole key to all of this is for us to get over the hump of this public works investigation. The sooner people move on from it, the better for the economy and the better, therefore, for revenue collection,” Mr. Go said.

“So, if all goes according to plan, then we should be looking at a much brighter 2026 in the first quarter.”

A decline in infrastructure spending dented government revenue collections.

Mr. Go said the Bureau of Customs (BoC) and the Bureau of Internal Revenue (BIR) saw “softer” revenue collection this year due to the corruption probe, as well as the four-month ban on rice imports.

“Growth is growth. (Collections were) softer versus the DBCC (Development Budget Coordination Committee) targets,” he said.

Total revenue collection during the January-to-October period slipped by 1.13% to P3.81 trillion, which is only 84.25% of the P4.52-trillion revised full-year program. The target is 2.23% higher than the P4.42-trillion actual collection in 2024.

“For Customs, we banned, for example, the importation of rice for practically four months out of 12 months of the year. It definitely affected Customs collections,” he said.

He also attributed the lower Customs revenue to the adverse weather conditions that trimmed working days.

BoC Commissioner Ariel F. Nepomuceno last week said revenue collection may fall short of its full‑year goal.

BoC’s emerging revenue forecast for 2025 is P939.4 billion, 2% below the P958.7-billion full-year goal.

“Every time the peso depreciates, it usually results in higher Customs collections because imports are dollar-based. Maybe December should be a good month for collections,” Mr. Go said.

The peso has breached the P59-a-dollar mark several times since November and sank to a record low of P59.22 on Dec. 9.

Meanwhile, Mr. Go said the BIR’s collections for the month of December seem “encouraging.”

“For BIR, I think it was doing very well for the first half of the year and then slowly softened as time went on. But fortunately, it still records an increase in collections every month,” Mr. Go said.

In the first 10 months, BIR collections rose by 9.55% to P2.65 trillion, accounting for 82.35% of the P3.22-trillion full-year target.

Mr. Go said it is unlikely that there will be any adjustments to the revenue targets.

Economic managers met this month to review the macroeconomic assumptions and targets but have yet to release a statement.

Analysts say the economic recovery and stronger revenue collections by early 2026 remain doable if catch‑up government spending is paired with credible anti‑corruption and governance reforms.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the economic rebound next year is possible.

“(Government spending) is an important driver of faster economic growth. This was the drag in the third quarter due to political noise related to anomalous flood control projects,” he said.

Governance reforms, alongside fiscal measures, could also help narrow the budget deficit and reduce reliance on borrowing, Mr. Ricafort said.

“The revenue collection may continue to improve, given the large increases in activity during the holiday season and possibly next year as well,” Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said in a Viber message.

However, he flagged the loss of confidence in the government due to the corruption scandal as a potential downside risk, which could lead to lower investments.

“Households, especially those earning through the informal sector, may find it bothersome to file taxes given the damaged reputation on the public budget,” he said. — Aubrey Rose A. Inosante