A Position Paper on:

Philippine Financial Market amidst Socio-Political Challenges

For decades, although the Philippine economy progressed slowly until the twenty-first
century, it has grown significantly in the previous two decades. Its average yearly growth rate
was 4.6 percent between 2000 and 2009, and it jumped to 6.4 percent between 2010 and 2019.
However, due to different issues in politics, economic, and health, the Philippines is facing
economic crisis. Nobody wants to see the economy fall into much more debts as funding would
fall on the shoulders of taxpayers.
Carlos Dominguez III, finance secretary, said that despite the negative consequences of
the crisis, such as increased energy and food prices, he is confident that the government will be
able to keep inflation under control. However, indirect stocks of the financial market would
include the price hike of fuel and food as the largest exporter of natural gas and wheat is Russia.
As the conflict rages on, Ukraine's and Russia's main trading partners—primarily the European
Union (EU)—will seek to trade with other countries such as the United States (US) and China,
driving up commodity prices in these markets as well. According to Diokno, Bangko Sentral ng
Pilipinas governor, the Russian invasion of Ukraine will hinder global growth. It will boost the
price of oil and other commodities, and it will, of course, disturb financial confidence a little. On
January 30, 2020, the Philippines confirmed its first case of novel corona virus. Domestic
infections are disrupting the country's economic activities and value chains, reducing demand
across the board. Furthermore, the expansion of COVID-19 to the provinces is expected to have
a far greater impact on the Philippine economy. According to Wren-Lewis (2020), the COVID-
19 pandemic would have a significant impact on countries' GDP due to reductions in production
and consumer demand. Furthermore, if banks fail to meet the financial needs of firms due to
falling demand, the stock markets around the world will collapse. According to Boon et al.
(2020), the COVID-19 pandemic may have three effects on the global economy: a.) factory
closures, service sector cutbacks, and disruption in the global supply chain will lead to an overall
decline in supply; b.) significant drop in travel and tourism, education, and other entertainment
services will affect demand; and c.) increases in uncertainty will lead to an increase in the
opportunity cost of investment. According to Corsetti and Marin (2020), the spread of COVID-
19 has resulted in large foreign exchange movements. The pattern of foreign exchange dynamics,
in particular, is accelerated, and capital outflows from emerging markets are significantly higher
week on week compared to the previous 2007-2008 financial crisis. Pandemics, such as COVID-
19, can disrupt multiple supply chains at the same time and affect multiple regions around the
world. As a result, these effects can last longer, be more unpredictable, and cause simultaneous
disruptions in supply, demand, and logistics infrastructure. The shock of the number of COVID-
19 daily infections differs in the short and long run to influence the impulse receiver fluctuations.
There was also strong evidence of causation running from COVID-19 daily infections to the
Philippine stock exchange index and from COVID-19 daily infections to the peso-dollar
exchange rate. The economic impact of COVID-19 is especially concerning because the
surveyed communities are already among the poorest and most vulnerable in the Philippines.
Communities face further increases in poverty as a result of significant job and income losses.
The pandemic caused the Philippines' economy to contract to its lowest level since World War II,
with GDP falling by 9.5% in 2020. It's the worst drop since records began in 1947, and it's the
first time the economy has contracted since 1998, when it shrank by 0.5 percent. GDP fell as low
as -16.9 percent when the tightest lock down was implemented in the second quarter of 2020.
Foreign direct investment (FDI) was reduced by 24.6 percent in 2019 as a result of the corona
virus pandemic. For the third year in a row, FDI has declined since its peak in 2017. The
government is relying on foreign investment to boost the economy and hopes to entice foreign
investors to invest in the Philippines through legislative measures such as corporate tax cuts. The
Philippines' national debt increased by 26.7 percent as a result of the COVID-19 crisis, reaching
P9.7 trillion in 2020. This had risen to P10.3 trillion by the end of January 2021, thanks to the
government's decision to take out a new bridge loan from the Bangko Sentral ng Pilipinas (BSP)
to cover its financial obligations, and revenue had fallen by 9% in 2020 due to rising expenses.
Aside from social aspect, political views and occurrence has a negative impact in the
Philippines’ financial market. Markets have made clear their preference for Marcos' main
opponent, incumbent Vice President Leni Robredo—an economics graduate and lawyer with
experience in poverty alleviation, rural development, and housing. The Philippine stock
exchange lost $9.3 billion the day after the vote, and analysts do not expect a rally until Marcos
reveals more detailed plans. On the 6th of May 2022, the Philippine Stock Exchange Index fell
1.6 percent to 6,759.90 ahead of election day. The index has dropped more than 5% this year,
making it one of Southeast Asia's worst performers amid concerns about rising inflation, a
slower-than-expected economic recovery, and rising geopolitical risks. According to
Punungbayan J.C. (2022), Marcos frequently brings up many of his father's programs in the
hopes of stealing people's emotions and eliciting some false nostalgia about his father's legacy.
In conclusion, the Philippine financial market amidst different socio-political occurrence
is challenged in a way that this country loses hope to stand again, independently, without debts
and increased taxes for Filipinos. As pandemic, COVID 19 arises, it was clearly shown that the
Philippine economy had been affected largely by trying to allocate budgets during this time.
Unfortunately, due to gaps of investments and transparent allocation of budget, the Philippine
economy falls down as the debts rises. It’s not just mainly because of the pandemic, but rather
the secrecy of SALN from the previous and present administration. One of Vice President Leni
Robredo’s platform in her presidential candidacy was about transparency of SALNs from every
branch and sector of the government, which is favorable for the economy and for the people,
however, due to the landslide votes for Ferdinand Marcos Jr., which is still unofficial, it will not
happen soon in the Philippines. Numerous foreign investors claimed that once Marcos Jr. is
elected as the 17th President of the Philippines, they will drop all their investments and
companies in the Philippines due to the corrupt and inhumane corruption and history of former
president Ferdinand Marcos Sr. These all claims that the financial market of the Philippines is on
a delicate situation from the previous administration, then pandemic happen, and now the
possible elected son of dictator as the president of the Philippines.
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