International Monetary Fund headquarters in Washington, D.C. (Tdorante10 / CC BY-SA 4.0, via Wikimedia Commons)
The widening flood-control scandal is eroding confidence in the Philippine economy, driving the peso lower and prompting the IMF to trim its 2025 forecast.
MANILA — The Philippine peso, which slipped past the ₱58 per US dollar mark late last week, continued to struggle this week as corruption concerns over flood-control projects rattled investor confidence and prompted the International Monetary Fund (IMF) to trim its 2025 growth forecast.
The Bangko Sentral ng Pilipinas (BSP) reference rate on Friday, September 26, was ₱57.9180 per US$1. Bloomberg data showed the peso hovering near ₱58.18 per US$1 on Saturday, its weakest since August. By October 2, traders said the peso’s volatility remained a “live trend,” with corruption headlines discouraging inflows and driving dollar demand.
Flood-control probe rattles markets
The Senate inquiry into anomalies in flood-control projects worth more than ₱545 billion has stirred investor caution. Former Department of Public Works and Highways engineers testified that contracts were overpriced, substandard, or never built, enabling huge kickbacks.
The scandal widened after the Court of Appeals froze 135 bank accounts and 27 insurance policies, while regulators traced hundreds more to suspicious transactions. The BSP also tightened rules on cash withdrawals, requiring stricter checks for transactions above ₱500,000.
Finance Secretary Ralph Recto warned that corruption in the program may have drained as much as ₱118.5 billion in economic value since 2023.
IMF cuts forecast
On October 2, the IMF lowered its 2025 Philippine growth outlook to 5.4 percent, down from 5.5 percent, citing “structural risks from governance concerns.” It warned that business confidence and foreign investment could weaken if scandals remain unresolved, noting that allegations of “ghost projects” erode trust in infrastructure spending.
While the Philippines remains among Asia’s faster-growing economies, the IMF said restoring public confidence is vital to sustain momentum.
Peso under double pressure
Analysts describe the peso as caught in a “double squeeze”: political risk at home and hawkish US Federal Reserve signals abroad that are lifting the dollar. BusinessWorld reported that turnover in Manila’s spot market surged to US$2.15 billion from US$1.73 billion, reflecting heavier sell-offs.
The peso’s weakness has spilled into equities, with the Philippine Stock Exchange index sliding to a six-month low.
Government response
Recto acknowledged the IMF’s downgrade but maintained that “fundamentals remain sound.” He pointed to moderating inflation and fiscal revenues on track, while citing reforms under the Independent Commission for Infrastructure (ICI) and the BSP’s cash-withdrawal rules as efforts to restore trust.
The administration has kept its 6–7 percent official growth target, banking on remittances, domestic demand, and infrastructure spending.
Confidence at stake
For households, a weaker peso makes fuel and food imports more expensive and raises debt costs, though remittances may stretch further for overseas Filipino worker families.
Economists caution that while the IMF’s 0.1-point cut is modest, the signal is significant. Repeated corruption headlines risk deterring investors, raising borrowing costs, and testing consumer confidence.
The peso’s slip past ₱58 and the IMF’s downgrade underscore how domestic scandals can magnify external pressures, leaving the economy exposed to both political shocks and global market swings.
