Weak Governance, Not Geopolitics, Hinders PHL Economic Growth: Ex-BSP Official

The Philippines' economic slowdown is primarily attributed to weak domestic legal and government institutions, rather than geopolitical tensions like those in the Middle East, according to a former central bank official. During a hearing by the Reinvigorate Investment and Sustainable Economic Growth Committee, Senate President Sherwin T. Gatchalian voiced concerns over P2.7 trillion in actual and opportunity losses due to corruption and inflation. Presiding Senator Ana Theresia “Risa” N. Hontiveros-Baraquel noted that the nation’s gross domestic product (GDP) growth has steadily declined throughout the year, with rates falling to 2.3% in the second quarter of 2026 from 3.9% in the third quarter of 2025. Both senators agreed that escalating Middle East tensions contributed to higher inflation, with Mr. Gatchalian highlighting the nation’s overreliance on imported oil. However, Ms. Hontiveros pointed out that growth and domestic demand were already slowing before the Middle East wars intensified. Diwa C. Guinigundo, former Deputy Governor of the Bangko Sentral ng Pilipinas (BSP), told the committee that recent geopolitical conflicts have merely exposed the weaknesses of Philippine institutions. “Investors need clear rules, predictable regulations, effective courts, and confidence that contracts will be honored. In other words, governance and lack of corruption,” Mr. Guinigundo stated. Adolfo Jose A. Montesa, co-convener for the People’s Budget Coalition, added that private investors’ confidence in the government has waned due to ongoing corruption scandals, specifically mentioning the flood control scandal in late-2025 and the current impeachment proceedings against Vice-President Sara Duterte-Carpio. Mr. Montesa drew a parallel between the Philippines’ 2026 economic hardship and the slowdown in 2011 under the administration of former President Benigno Simeon “Noynoy” C. Aquino III. Public construction in 2011 fell to 29.3%, close to the current 2026 figure of 32.4%. GDP growth that year also decreased from 7.6% in the fourth quarter of 2010 to 3.7% in the third quarter of 2011. However, Mr. Montesa noted that the economy bounced back within a year, reaching nearly 7%. The key difference then, he explained, was that private investors had faith in the national government’s capacity to address institutional lapses. “Investors believed that the cleanup was real, it was credible, and that it would outlast the people who were doing the cleanup,” Mr. Montesa said. “So, honestly, our assessment now is that the belief in that kind of cleanup right now is harder to find.” When Ms. Hontiveros asked the panel about potential reforms to restore investor trust, Mr. Guinigundo emphasized that reform alone might not revive the nation’s economy. Instead, he called for a clear demonstration that the Philippines’ justice system and rule of law are still functioning. Information Source: BusinessWorld Nation