Political turmoil rattles PH economy

Two global banking giants have flagged political and fiscal challenges posing near-term risks to the Philippine economy, especially in the aftermath of a corruption scandal involving massive public spending on ineffective flood control projects in recent years.

- BEN ARNOLD DE VERA

While “there is a strong pipeline of infrastructure projects” in the Philippines, “recent developments on flood control projects’ corruption raise some risk,” MUFG Global Markets Research senior currency analyst Michael Wan said in a Sept. 19 report.

“One key risk factor to watch for the Philippine peso is the scheduled protests on the 21st of September, which are tied to the anniversary of the declaration of martial law in the Philippines. These follow from recent but likely smaller-scale protests that happened [last] week across different places” in the country, Wan said.

“These protests are in response to recent corruption issues around flood control projects, even as we don’t think it is a major driver of markets today for Philippine assets. Markets will be watching closely for the size of the protests, and to see if the political pressure results in any changes in government policy, which ultimately could flow through to Philippine peso foreign exchange (FX) and rates markets,” Wan added.

The MUFG report noted that a series of Senate hearings on corruption allegations in flood control projects last week culminated in House Speaker Martin Romualdez—a cousin of President Ferdinand R. Marcos Jr.—resigning from his post to supposedly help restore public trust, amid intensifying speculation over lawmakers' alleged involvement in kickbacks.