Infrastructure spending target cut points to prolonged fiscal drag
From AB Capital's The Opening Bell: Three Moves
Event
The Department of Budget and Management trimmed the Philippines’ 2026 infra spending target to 4.3% of GDP (i.e. about P1.3tn) from earlier projections of 5.1%. The updated target reflects tighter scrutiny and slower execution in the wake of flood control project reviews.
View
We believe this reduction signals a material fiscal drag on growth, coming after months of weakened public works disbursement that shaved off economic momentum in late 2025. With infra spending below the level needed to meaningfully lift capex, its contribution to GDP is likely to remain muted without execution acceleration.
Catalyst
Growth sensitivity to infrastructure execution is high. If actual disbursements exceed the 4.3% target by even 0.5-1.0pp of GDP, domestic demand and construction activity could lift overall growth by 0.3-0.6pp. Conversely, further slippage would deepen the fiscal drag and weigh on capex confidence.
Action
In our view, slower infra lift supports a continued underweight on construction-linked equities while favoring sectors with more stable demand fundamentals. We recommend monitoring monthly infra disbursements as a leading indicator for GDP revisions and capex visibility into 1H26.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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