Corruption Scandal Darkens Philippine Economic Outlook

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00:00On the political side, it has already resulted in the House Speaker and the Senate President being replaced.

00:05And on the economic side, there could be a fallout, meaning economists are seeing that it could result in lower government spending,

00:12which accounts for a fifth of output of the Philippines, which is the second fastest growing in the region.

00:19Also, with tighter scrutiny on projects, the real projects, the projects that are in the pipeline could get delays.

00:25Hence, the impact on job creation, on government spending, and on the broader economy as a whole.

00:33Okay. Neil, let's talk about the market.

00:36So, clearly, more than one factor is suspect here as far as why the market is coming under pressure.

00:45If you could just list the factors involved here and why we are seeing the markets come under pressure.

00:51And is there light at the end of this current tunnel?

00:58Indeed, indeed.

00:59The Philippines stock market is like an unloved dish in the regional and global menu so far.

01:05So, despite sweeteners like the Philippines operating as the second fastest growing in Southeast Asia,

01:11companies reporting top-line, bottom-line, double-digit growth,

01:14and sweeteners like dividends to stockholders, investor sentiment has turned sour in this part of the globe

01:22because of uncertainties, because of risk, both domestically and externally.

01:27Domestically, we have mentioned that this scandal has eroded investor confidence in the Philippines,

01:32particularly foreign investors.

01:34We've seen lots of foreign selling in the past days.

01:36And also, on the external side, we see that the peso is depreciating,

01:42showing foreign exchange risks to foreign investors,

01:46not to mention uncertainties emanating from the U.S.

01:50And also, a recent string of typhoons here in the Philippines have still concerns

01:54that inflation might go higher again, affecting the consumption of the Philippines.

02:00Okay. Tells me, are there any silver linings in all this, Neil?

02:07Or are you telling me that we should just brace for more headwinds?

02:13Yes, indeed.

02:14So, analysts and bankers are on a wait-and-see mode for now,

02:17standing by for further catalysts like central bank rate cuts

02:21and also signs of improved consumer spending.

02:25So, the Philippines, they say that the Philippines is now operating at a bargain.

02:30Cheap prices, offering great returns for those with patient money.

02:34So, essentially, a waiting game for now, a waiting game for positive leads

02:39and less risks for appetite dampeners in the market.

02:44Neil, thank you so much.

02:45A lot of food analogies there.

02:47Thanks for picking me hungry.

02:48Unloved-ish in this current cuisine list.

02:53Neil, thank you so much.

02:54Neil Jerome Morales there in Manila for some point.

02:58And, of course, tides turn and tastes evolve.

03:02And, at some point, we'll see, of course, hopefully, money come back in.

03:05It's also worth pointing out, right?

03:06So, we'll talk about this story in a moment.

03:07There are some silver linings here as far as the bond market is concerned.

03:12The market, equity market specifically, is trading in single digits.

03:15So, that's perhaps one enticing appetizer that could lure people back in.

03:19The other, of course, as we talk about pressure on the economy and markets,

03:24sovereign debt actually could be a bright spot thanks to rising foreign demand.

03:29You have lower government borrowings.

03:31Supply-demand dynamics, effectively, are in favor of the bond markets there.

03:36The Treasury Bureau says foreign holdings more than tripled to 6% as of August,

03:44if you measure that back from 2021, with inflow set to continue as supply drops.

03:48And, Philippine bonds did come under pressure in the third quarter,

03:51just to mention that they're trailing all Southeast Asian pairs.

03:54And, it's unsurprising why do we –

03:56is it too early to be talking about sovereign ratings at this point,

03:59given the fiscal issues there in the country?

04:02or do we need to wait for more Catholics as far as that's concerned?

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