When political and sibling rivalry affect foreign investor confidence

Foreign investors and economic stakeholders may continue to opt out of investing on the Philippines should political tensions worsen, experts warn.

Foreign investors may remain cautious about the Philippines amid growing concerns over political uncertainty and governance, experts warn. Recent economic indicators—including a slowdown in GDP growth, declining stock market performance, and a weakening peso—reflect both global challenges and local risk perceptions that could influence investment decisions.

Growing frustration over alleged corruption in flood control infrastructure projects has led to public disagreements among the country’s highest-ranking officials.

Amid these ongoing disputes and the related investigations, key economic indicators were also reported at notable lows, including the lowest quarterly GDP growth since the COVID-19 pandemic, a seven-year low in the Philippine Stock Exchange index, and a peso-dollar exchange rate of P59.17.

One can’t help but wonder: is the economy slipping because of these political tensions at the very top of the country’s leadership? radar Business weighs in.

Other economies’ perception of PH leadership

Foreign investors may reconsider or delay investments in the Philippines if perceptions of political and economic instability persist, raising concerns about potential capital flight, analysts warn.

“The president should continue to be more conscious of our reputation in the international arena, because we’re already trying to harvest somehow the fruits of past efforts over the past few years,” said Froilan Calilung, assistant professor of political science at University of Santo Tomas, in a December 2, 2024 interview with Radyo Pilipinas.

World Bank data shows that foreign direct investments (FDIs) into the country have been on a sharp decline since 2021. At the time, the Philippines was coming off of the tails of COVID-19 lockdowns and had seen massive investments the year before amid the entry of foreign aid. 

FDI inflows continued to decline even after a change in administration in 2022, despite efforts to promote foreign partnerships and attract new investment.

Though global inflation has undoubtedly played a role in declined investment activity, some experts have also warned that confidence may be low due to perceived weak leadership.

“Many corporates are not looking at growing and investing. Part of it is high interest rates, and part of it is this uncertainty about government and where we’re going to go. Of course, corporates will want to follow government spending, but right now, it looks like we have to pull back on that spending until we can clean the mess that we’re in,” said Phillip Hagedorn, president of ATRAM Trust Corporation, in a November 17 interview on Bilyonaryo News Channel.

Economic activity powered by foreign economies also reflects in the devaluation of the Philippine peso. This November, the peso-dollar exchange rate slid to a low of P59.17. Though this coincided with local political developments, some experts have also attributed this fall to the recently concluded 43-day government shutdown in the United States as the Senate failed to pass the annual budget bill.

Despite the impact of foreign economic developments on local activity, perception of stable leadership is nonetheless important in order to assure foreign economies of the Philippines’ stability and prowess.