Limited fallout from corruption seen

Despite the corruption scandal surrounding flood control projects and the possibility of further unrest in the coming months, the economic impact on the Philippines is expected to remain limited, according to think tank Capital Economics.

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In an Oct. 8 report, Capital Economics deputy chief emerging markets (EMs) economist Jason Tuvey noted that while additional unrest could occur, it is unlikely to cause significant harm to the economy as long as it remains small and short-lived.

Economic and financial market effects are likely to be contained if any unrest is limited in scale and duration, the report said, adding that there is unlikely to be a lasting impact on gross domestic product (GDP).

The think tank noted that looser fiscal policy is not a major concern, with public debt, as measured by general government (GG) debt, below 60 percent of GDP and financial risks contained.

However, the widening current account deficit-now at about four percent of GDP-leaves the peso vulnerable if investor confidence weakens.

It also added that limited evidence indicates recent protests may have dampened economic activity in the Philippines, as the purchasing managers' index (PMI) dropped sharply in July and remained below 50 in August. Retail and tourism could be affected-or even the broader economy-if key industries go on strike.