GEOPOLITICAL tensions exposed rather than caused the country’s economic challenge, a former central bank official said, noting that weak legal and government institutions are the bigger culprit.
During the Reinvigorate Investment and Sustainable Economic Growth Committee hearing, Senate President Sherwin T. Gatchalian raised concern over about P2.7 trillion worth of actual and opportunity losses due to corruption and inflation. Presiding Senator Ana Theresia “Risa” N. Hontiveros-Baraquel added that the nation’s gross domestic product (GDP) has steadily declined throughout the year, with growth rates down to 2.3% in the second quarter of 2026 from 3.9% in the third quarter of 2025.
Both senators agreed that growing tensions in the Middle East led to higher inflation, with Mr. Gatchalian pointing to the nation’s overreliance on imported oil. However, Ms. Hontiveros noted that growth and domestic demand was already slowing down before Middle East wars intensified.
Former Deputy Governor of Bangko Sentral ng Pilipinas Diwa C. Guinigundo told the committee that recent geopolitical conflicts 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 said.
Adolfo Jose A. Montesa, co-convener for the People’s Budget Coalition, added that private investors’ confidence in the government has weakened because of ongoing corruption scandals — particularly, the flood control scandal in late-2025 and the current impeachment of Vice-President Sara Duterte-Carpio.
Mr. Montesa compared the Philippines’ 2026 economic hardship to the 2011 slowdown under the administration of former President Benigno Simeon “Noynoy” C. Aquino III.
Public construction in 2011 fell to 29.3%, which is close to the current 32.4%, Mr. Montesa said. He added that GDP growth that year also decreased from 7.6% in the fourth quarter of 2010 to a staggering 3.7% in the third quarter of 2011.
Mr. Montesa said, however, the economy bounced back within a year, reaching nearly 7%. The difference, he said, is 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.”
Ms. Hontiveros asked the panel what possible reforms could restore investor trust in the government; but Mr. Guinigundo said reform won’t necessarily be what will restore the nation’s economy.
Instead, he called for a clear demonstration that the Philippines’ justice system and rule of law are still working. — Francessca S. Abalos