PHILIPPINE economic growth may fall below 4% in the near term as the billion‑peso flood control scandal drags on, affecting government spending and dampening consumption and sentiment, Nomura Global Markets Research said.

“I think going forward, these spillover effects (from the graft scandal) will also expand,” Nomura Chief Association of Southeast Asian Nations (ASEAN) Economist Euben Paracuelles told Money Talks with Cathy Yang on One News on Thursday.

The scandal, which curbed state spending last year, is expected to dampen household consumption and business investment amid weaker sentiment, he added.

“If the drag is now sort of becoming more broad-based, not just the drop in government spending, you’ll see growth coming potentially below 4%, at least in the near term,” he said.

Nomura now expects the gross domestic product (GDP) to expand by 5.3% in 2026 from 5.6% previously.

This is still within the government’s recently revised 5-6% target this year.

Economy Secretary Arsenio M. Balisacan earlier said growth targets were lowered through 2027, after GDP growth likely slowed to 4.8-5% in 2025 amid the flood control controversy.

The government cut its 2026 projection to 5-6% and to 5.5-6.5% for 2027 from the earlier 6-7% range. The 2028 target was retained at 6-7%.

Mr. Paracuelles anticipates that the government will roll out catch-up spending plans, possibly in the second half of the year.

Meanwhile, the Philippines may earn a credit rating upgrade if the government manages to resolve the flood control corruption issue within a year, Mr. Paracuelles said.

“The key for me is 12 months from here, when they need to decide on whether they need to upgrade the Philippines, I think it’s still quite uncertain,” he said.

“If, at that point there will be some resolution to the corruption scandal, they could potentially upgrade the Philippines to ‘A-,’ right? But on the other hand, if there’s still no clarity, they could potentially — the risk I see is from ‘positive,’ we go back to ‘stable,’” he added.

Last year, former Finance Secretary Ralph G. Recto said the multibillion-peso flood control corruption mess may have derailed the country’s chances of earning a credit rating upgrade from S&P Global Ratings.

S&P said it kept its long-term “BBB+” and short-term “A-2” credit ratings on the Philippines, as well as its “positive” outlook.

A positive outlook means the Philippines’ credit rating could be raised over the next two years if improvements are sustained.

At the same time, Economy Undersecretary Rosemarie G. Edillion said the government expects the peso to move “sideways” after hitting a fresh low on Jan. 7.

“It really depends on what’s happening in the US as well versus what’s happening with our country. I think right now with the recent move of the US, everybody’s still weighing in. Is this a good or a bad thing?” she said in the same program on Thursday.

“Others will still adopt a wait-and-see attitude over the next few days,” she added.

The peso hit a record low on Jan. 7, closing at P59.355. — Aubrey Rose A. Inosante