Severe El Niño could dampen infrastructure spending in early 2027 — DBM

WORKERS start road repairs of massive potholes in Valenzuela City, Aug. 13, 2026. — PHILIPPINE STAR/MIGUEL DE GUZMAN

A SEVERE EL NIÑO could disrupt the country’s infrastructure program by early next year, potentially erasing gains from a planned catch-up in spending in the second half of 2026, the Department of Budget and Management (DBM) said.

Budget Assistant Secretary Romeo Matthew T. Balanquit noted that the upcoming “Super El Niño” could take a major toll on the government’s infrastructure spending in the first quarter of 2027.

“I think it’s more of the El Niño. It’s (expected to come) sometime in November, I think that will be the harshest. But it could extend until the first quarter of 2027,” he told reporters on the sidelines of a World Bank event in Mandaluyong City on Monday.

“That will have quite a significant effect (on infrastructure spending) but it is not yet included in our expenditure program,” he added.

The Philippine Atmospheric, Geophysical and Astronomical Services Administration last week warned that the El Niño could become “very strong” until December, and persist until the first half of 2027. It said that up to 85 provinces nationwide could suffer from dry conditions, dry spell, and drought until the end of March 2027.

Infrastructure spending fell by 34.1% year on year to P98 billion in June, marking an 11th straight month of decline. In the first half of 2026, infrastructure spending plunged by 40.8% to P367.4 billion from the P620.2 billion spent a year ago, as tighter safeguards imposed by the Public Works department following last year’s flood control controversy delayed disbursements.

According to Mr. Balanquit, the slowdown remains largely due to cautious sentiment in the public construction sector.

“It’s like they’re very cautious to release money, to spend, or to pay their suppliers. So, this is the problem why there are delays,” he said. “But we have already released them. So, meaning we’re just on the waiting mode when this will be disbursed or deposited by the contractors in their own bank.”

However, the adverse weather and elevated oil prices amid the ongoing Middle East war have also pulled back some progress in infrastructure spending, the DBM official added.

The DBM has vowed to go full speed in its catch-up spending for infrastructure and other capital outlays, with Mr. Balanquit noting that they are eyeing around a 20% uptick in the second half of the year.

Mr. Balanquit said the DBM is only waiting for agencies to pay contractors for completed infrastructure projects, which should boost public infrastructure spending before yearend.

“The agency can already pay them out, their contractors. But it seems that they have not done it yet. So, it’s just a timing thing,” he said.

The Development Budget Coordination Committee (DBCC) programmed P251.3 billion in infrastructure and other capital outlays for the third quarter, 2.2% lower than P256.9 billion in the previous year.

Meanwhile, the DBCC allotted P328.44 billion for the fourth quarter, up 49.4% from P219.8 billion a year earlier. If realized, this would bring the government’s second-half infrastructure spending higher by 21.6% annually to P579.74 billion.

The figures exclude infrastructure spending coursed through subsidies and equity to government-owned and -controlled corporations, as well as transfers to local government units.

Based on the 2027 Budget of Expenditures and Sources of Financing, public infrastructure and other capital outlays are expected to decline by 15.1% to P931.54 billion this year from P1.1 trillion in 2025. It is, however, projected to climb by 4.6% to P974.48 billion next year.

Once the payments for infrastructure programs are made, the country’s gross domestic product (GDP) may grow faster in the latter half of this year, according to Mr. Balanquit.

“Of course,” he said when asked if the government expects a growth pickup once all pending payments and activities are completed before the yearend.

“I think the GDP is highly sensitive to government spending. So, it’s kind of a main driver. At least in this time of crisis, it really has to be the government who has to be the one doing the shopping for the economy,” Mr. Balanquit added.

In the second quarter, the economy tumbled to a new post-pandemic low growth of 2.3% after public construction contracted due to the lingering effects of last year’s flood control scandal and household spending weakened anew amid rising prices.

Mr. Balanquit noted that the recent public construction slump was the “culprit why we have a slowdown in the economy.”

“So that’s really the problem. So we (will) try to reverse that kind of incident, hopefully in the coming second half,” he added.

Economic managers have said the Philippines has to reach at least 4.4% growth in the second half to hit the bottom end of its 3.5%-4.5% full-year target.

Mr. Balanquit also said the DBCC is set to convene in November to revisit the government’s macroeconomic targets but noted that revisions would most likely affect revenue rather than spending.

“Sa expenditure, medyo piga na (On expenditure, we are already operating with very little room),” he said. “But we cannot afford to reduce it any further. For us, the control is to keep it from increasing, because increasing it would mean abandoning the planned deficit target.” — Katherine K. Chan