Corruption’s economic costs

The great takeaway for 2025 was that corruption is not only a moral and political issue, but an economic one. Filipinos are acknowledging the fact that governance problems such as the flood control scandal that exploded in the second half of the year have very real economic consequences.

First, people’s livelihoods are affected by unmitigated flooding. Floods destroy crops and compromise the mobility of people and goods. As a result, people experience real economic losses. They cannot go to work; small businesses are affected; their expected harvests do not materialize. Economic activity halts.

Second, the multiplier effects of sound infrastructure are not realized. When taxpayer funds intended for critical infrastructure are diverted into the pockets of a few, the resulting substandard projects fail to protect communities and deliver public value. The benefits that these projects are supposed to yield are not achieved.

Third, corruption dampens consumers’ confidence. The latest Consumer Expectations Survey of the Bangko Sentral ng Pilipinas (BSP) for the 4^th quarter of 2025 shows that consumer sentiment has become more pessimistic. Survey respondents answered that their weaker confidence in spending is due to graft and corruption in the government, higher inflation, lower household income, and unfavorable weather conditions, and other natural calamities.

Consumers were also concerned about the effective delivery of government services amid public discontent over governance-related issues. Lower confidence among consumers carries significant economic implications: as a consumption-driven economy, the Philippines is highly exposed to declines in household spending, translating directly into slower growth and weaker economic momentum.

Finally, corruption spooks investors, especially those from abroad.

From an investment perspective, governance quality remains a key differentiator. Inclusive governance — ensuring that policies, resources, and opportunities benefit a broad spectrum of society — reinforces stability, builds public trust, and strengthens the overall investment climate. Clear policies and consistent regulations boost investor confidence and encourage investment. On the other hand, uncertainty, corruption, and weak enforcement discourage investment, as reflected in lower capital formation and reduced foreign inflows.

The latest survey numbers bear this out. Pulse Asia’s latest Ulat ng Bayan, conducted on Dec. 12-15, 2025, showed that economic issues remain to be Filipinos’ most urgent national concern.

Some 59% of Filipinos find that controlling inflation remains to be the topmost urgent national concern, followed by increasing the pay of workers (39%), reducing poverty (22%), and creating more jobs (19%).

It is important to note that 48% are also greatly concerned about fighting graft and corruption in the government.

These concerns are further reinforced by the latest Stratbase-commissioned survey conducted by Pulse Asia on Dec. 12-15, 2025. It shows that 38% of respondents identified making food prices more affordable as the most urgent action government leaders should take. This was followed by reducing or eliminating corruption to improve service delivery (31%) and creating more jobs and livelihood opportunities (21%).

Thus, strengthening transparency, accountability, and regulatory coherence is not only a governance imperative but an economic one — essential to sustaining growth, attracting long-term investment, and ensuring that economic gains are broadly felt across sectors in Philippine society.

The fundamentals of economics are no longer just confined to the usual indicators. To gauge where the economy is going, a vital clue is how the government is run by its stewards. If it is not being run well and transparently, if there are long festering issues that are not being addressed, and if leaders act like entitle masters rather than hardworking public servants, investors will find it difficult to put their trust in the system.

The consequences are immediate and measurable: reduced investment leads to fewer jobs, weaker household incomes, and rising pressure on the cost of living. With economic concerns remaining at the top of mind of the Filipino people, inclusive and accountable governance is not optional — it is central to sustaining growth, protecting livelihoods, and ensuring that economic gains benefit all sectors of society.

Now that a new year is beginning, our leaders must remind themselves why they are in office in the first place. Serving the nation means serving only the nation — not their own interests, not their allies’. Performing their duties with utmost transparency will benefit the country in numerous ways.

In the end, investors will flock to countries whose pronouncements are matched by actual circumstances on the ground. If we say, for instance, that we want to be a digitally empowered country, our actions must reflect this intention in terms of the priority we give to digital transformation. And if we say we are a nation that is bent on addressing the corruption problem, all its actions — by the national and local executives, by legislators, and by the judiciary — must show that everyone is on board.

Businesses thrive in an environment of transparency, consistency, and predictability. This year and onward, let us move toward this ideal, not only in select geographical areas or sectors, but across the entire Philippines.

Victor Andres “Dindo” C. Manhit is the president of the Stratbase ADR Institute.