Political risk heightens

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“The Philippines no longer feels like a government working for its people,” a Facebook meme declares. “It has evolved into a deeply organized syndicate protecting its own interests instead of serving the nation.”

The badly scripted drama at the Senate last week has totally convinced many of us that the once respectable upper house of our Congress is no more. It has become an institution marked by ambition and political opportunism.

The Senate should be abolished for being an absolute waste of scarce national funds. Its overpriced new building under construction should be made into a public hospital.

Unfortunately, abolishing the Senate and reducing the membership in the House cannot be done without amending the Constitution. And both chambers will block any such move, even if doing it is an absolute necessity in the national interest.

The Senate power grab led by Alan Peter Cayetano was clearly a move to defend senators facing corruption charges in connection with ghost projects. Sen. Bato Dela Rosa was convinced by Cayetano to surface and cast the deciding 13th vote on the promise that the Senate will not allow his arrest to face charges in the International Criminal Court.

The Cayetano power grab was also seen as a move to protect Vice President Sara Duterte who was just impeached by the House of Representatives. Cayetano is a loyal ally of the Dutertes.

Last week’s Senate drama couldn’t have come at the worst time. It raised the level of political uncertainty in our country that compounds the economic pressures we already face because of the oil crisis that isn’t likely to abate soon.

This means it is highly unlikely that significant FDI will be attracted to help boost the country’s economy.

BMI, a unit of Fitch Solutions, minced no words in describing our country’s current prospects:

“We think there is a growing risk of social unrest over cost-of-living pressures. The US-Iran war has pushed up inflation with fiscal support constrained by limited fiscal room.

“Meanwhile, Vice President Sara Duterte was impeached overwhelmingly in the House. Nevertheless, we still think Sara will be acquitted by the Senate.

“Moreover, concerns over the flood corruption scandal continue to linger. The drag on growth and the perceived lack of accountability will keep political risks elevated.”

Deepening institutional polarization and public dissatisfaction are eroding market confidence.

The intense friction between the Marcos and Duterte political dynasties has created a long-term policy unpredictability. That heightens political risk.

The level of political risk influences investors in their internal valuation models in three primary areas:

High political risk increases a country’s “sovereign risk premium.” Investors demand a higher hurdle rate (minimum acceptable return) to justify deploying funds.

Capital-intensive projects with long payback periods (e.g., infrastructure, energy, telecommunications) require a predictable regulatory environment. If contracts face threats of cancellation after an election, capital diverts to safer places. Remember how Duterte trashed long-standing PPP contracts with Metro Manila water services concessionaires.

Today, notable domestic political head-winds are beginning to affect institutional investor confidence.

Fitch Ratings revised the country’s outlook to Negative from Stable. The agency cited the paralysis of public infrastructure projects stemming from the anti-graft investigations as a key factor disrupting economic momentum.

Spending on infrastructure and other capital outlays fell to P59.1 billion in March from P113.5 billion in the same month in 2025. MoM, it declined by 11.1 percent, largely attributed to the lower disbursement performance of DPWH.

S&P Global Ratings similarly downgraded the country’s outlook to Stable from Positive.

A “Negative” or “Stable” (from Positive) outlook flags to international asset managers that the country’s creditworthiness faces systemic pressure, making future borrowing more expensive for both the state and private local companies.

At a time when the cost-of-living crisis stemming from the US-Iran war is emerging as the primary driver of rising social and political risk in the Philippines, the senators should have known their priorities better.

With headline inflation spiking to 7.2 percent in April, household budgets have tightened and the livelihoods of workers in fuel-intensive sectors like transport are at extreme risk. Hunger rate has increased.

Unfortunately, the government can’t do more than it is already doing given its limited fiscal space. People are becoming frustrated and that is translating into simmering unrest.

A prolonged US-Iran conflict where oil prices remain higher for longer, will present a clear risk for social unrest to boil over in the coming months. BMI’s proprietary political risk index, the Mass Support Risk indicator has begun ticking up again.

Economists at the Philippine Institute for Development Studies observed that “The true bottleneck lies in confidence,” pointing to erosion in governance credibility, uneven enforcement of the law and recurring corruption scandals that dominate public discourse.”

The economists from the government think tank believe that restoring momentum requires demonstrable accountability, not policy slogans. Investor confidence, they said, depends on visible justice, evenhanded enforcement and integrity in public service.

In protecting its members accused of serious crimes, the Senate is doing the opposite of what it takes to regain confidence in government and the national leadership.

As a result, the Senate has lost its relevance and public respect. It has become an exclusive club, a mafia, rather than an august chamber of statesmen. Many of the senators regard the national interest as an afterthought, at best.

There is an urgent need for government officials to prioritize helping the country navigate the treacherous waters for the rest of the year. Even the two pillars of the Philippine economy — the business process outsourcing industry and OFWs are now under threat.

For the country to survive, the government must demonstrate that regulatory frameworks, judicial systems and infrastructure rollouts can remain insulated from political warfare. Good governance, in short.

But it’s impossible for our elected leaders to prioritize good governance over political ambitions. We all suffer the scum our people elected.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco