By Joey Sarte Salceda
Chair, Institute for Risk and Strategic Studies, Inc.
The 4.4 percent GDP growth we recorded in 2025 may not be as bad as it looks. But not for comforting reasons.
The Philippine Statistics Authority computes GDP using two approaches. On the production side, it measures the gross value added of industries, including construction. On the expenditure side, it measures government final consumption expenditure and gross capital formation. For government spending, PSA relies on data from the Annual Financial Reports submitted to COA, the Budget of Expenditures and Sources of Financing from DBM, and cash operations reports from BTr.
The critical point: PSA measures what was disbursed and reported, not what was physically built. If a contractor received P1 billion for a flood control project that was never constructed, the national accounts would have recorded P1 billion in construction output and P1 billion in public capital formation. The GDP captured a ghost.
A Hypothetical Exercise
What follows is a thought experiment, not a definitive calculation. The actual magnitude of ghost projects is still under investigation. But the logic is worth tracing through, because it reveals how fraud distorts not just one year’s statistics but the entire trajectory of measured growth.
Executive Secretary Ralph Recto estimated that ghost flood control projects from 2023 to 2025 cost the economy between P42.3 billion and P118.5 billion. Let us take the upper bound and assume P118.5 billion over three years, or roughly P50 billion recorded in 2024 alone as construction output that did not actually exist.
The Base Effect
Growth rates are computed against the prior year. If 2024 GDP included P50 billion in ghost projects, then the base against which we measure 2025 is artificially high.
Suppose reported 2024 GDP was P22 trillion at constant prices, but true GDP—excluding fictitious construction—was P21.95 trillion. If 2025 GDP is P22.97 trillion:
Reported 2025 growth = (22.97 − 22.0) / 22.0 = 4.4%. True 2025 growth = (22.97 − 21.95) / 21.95 = 4.6%
Under this scenario, the base effect alone adds 0.2 percentage points to true growth. We are being penalized, statistically, for having been dishonest before.
The Missing Multiplier
Infrastructure spending has a fiscal multiplier. A road, once built, reduces transport costs, enables commerce, and generates economic activity beyond the initial construction. An ADB study on fiscal multipliers in developing Asian economies found that cumulative multipliers for government spending range between 0.73 and 0.88 over four to eight quarters. A recent input-output analysis of public infrastructure investment in the Philippines estimated multiplier effects as high as 1.27.
Ghost projects have no multiplier. A flood control structure that was never built does not prevent floods. A revetment that exists only on paper does not protect farmland or enable dry-season farming.
If P50 billion in flood control was recorded in 2024 but never built, the downstream economic benefits that should have materialized in 2025 do not exist. Using a conservative multiplier of 1.5, real infrastructure worth P50 billion should have generated an additional P25 billion in induced economic activity the following year (the portion of the multiplier beyond the initial spending). That represents roughly 0.11 percentage points of growth that will never materialize because the underlying infrastructure was never constructed.
Where Growth Could Have Been
Putting these together: We recorded 4.4 percent growth in 2025. If measured against a corrected 2024 base that excludes ghost projects, true growth is closer to 4.6 percent.
If the infrastructure had been real and its multiplier effects had kicked in, 2025 growth could have reached 4.7 percent or slightly higher.
We got the worst of both worlds: an inflated base that makes our current performance look worse than it is, and missing multiplier benefits that should be generating economic activity right now but are not.
The Implication
This exercise is hypothetical. The actual figures will depend on what COA and the investigating bodies determine. But the logic holds regardless of the precise amounts.
When the investigations conclude, PSA should revise the 2023 and 2024 national accounts to reflect the true level of economic output. This is not just an accounting exercise. It is a matter of statistical integrity. Otherwise, it is incumbent upon the PSA to prove to the public that the ghosts were exorcised from the national accounts. Good economic planning depends heavily on good economic statistics.
