Political rumblings

There is good news and bad news about the economy as we draw closer to the end of the year.

The good news is, last week, the National Economic and Development Authority (Neda) expressed confidence the country would reach upper middle-income economy status by next year.

Under World Bank standards, economies that have gross national income (GNI) per capita between $4,466 and $13,845 are considered upper middle-income economy.

The textbook characteristics of those economies are strong infrastructure investment and ease of setting up a business.

In the region, only Malaysia and Thailand are in that income category. The rest of the member countries are considered lower middle-income economies.

Neda Secretary General Arsenio Balisacan said the Philippines hit a GNI per capita of over $4,200 last year and may reach the upper middle-income bracket by the end of 2025. Fingers crossed.

The bad news is, the two highest political leaders of the country are engaged in a public political dispute with criminal undertones never before heard or seen in the country.

And to think that just two years ago, the president and vice president were the best of political allies and their combination resulted in their election via convincing majority.

Worse, former President Rodrigo Duterte had called (although subtly) on the military to step into the picture to remedy alleged acts of graft and corruption by the national leadership.

The political rumbling had prompted 13 business and civic organizations to express their concern “… over recent statements and actions that threaten the stability of our constitutional order and country.”

They urged all public officials and political leaders to demonstrate restraint, uphold the dignity of their offices and prioritize the welfare of the Filipino people above political interests.

Despite the political turmoil, however, Balisacan said foreign investors would be upbeat about the Philippine economy as long as the government maintained its key economic policies and remained focused on its growth targets.

Balisacan’s expression of optimism does not come as a surprise. He is aware that if he says anything to the contrary, no matter how guarded or conditional it may be, it would spook domestic and foreign investors.

As past experiences have shown, public statements of key government officials on financial or banking issues, especially if they are negative, tend to be self-fulfilling and result in unexpected adverse consequences.

They get a life of their own and remain unchanged or misinterpreted in spite of belated clarifications or attempts to downplay their adverse effects.

For local business executives, the acrimonious political rift may not be a cause for serious concern. It’s par for the course in a political system that is highly personal and bereft of sustainable political ideologies.

They know that this is a prelude to the 2028 presidential elections, where existing and budding political dynasties are expected to fight tooth and nail for dominance.

But not so for foreign investors who are already in the country or have plans of putting their money here. For the former, they have no choice but see how things play out in the long run, and for the latter, the fear of political instability that may result from that political spat would be reason enough for them to entertain second thoughts about making any investments.

They want to be assured that all agreements or arrangements they may enter into with the government will be honored regardless of whoever gets into power.

With other countries in the region also aggressively pursuing foreign investments with all kinds of freebies, putting the Philippines at the end of the list on areas of possible investments would not be a difficult decision for them to make.

No doubt, the ongoing political drama is putting a drag on the national economy at a time when its need for foreign investments is acute.

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