Not even the recent announcement of stronger-than-expected growth in the third quarter of the year has reassured businessmen and foreign investors who are spooked by the increasingly heated political squabbles.
Surveys show that incumbent President Arroyo is not assured of victory in the May national elections. More troubling is the candidacy of top movie star Fernando Poe, a high-school drop-out with no history of public service.
Although the polls are still half a year away, campaigning for the elections has unofficially begun with legislators jockeying for position rather than passing vital economic reforms.
"Don’t expect anything in the next six months," economist Bernardo Villegas warned businessmen, saying legislators "will make the political climate very adverse."
After Poe formally announced he was running for the presidency last Wednesday, the Philippine peso plunged to a record low of 55.85 to the dollar the next day, although it has since recovered slightly. The stock market closed on Friday at seven-week lows.
Poe has not given any platform of government, saying only that he would identify his economic advisers later.
Coincidentally, Moody’s Investors Services warned on Wednesday it may downgrade Philippine credit ratings amid heightened political uncertainties.
"In view of the tensions that have accompanied political cycles in the past, the nation’s fiscal policy could be handcuffed and capital outflows become more volatile as May’s presidential election approaches," Moody’s said.
Standard and Poor’s also warned that "the personality-based nature of Philippine politics and the weakness and fractiousness of the country’s institutions" could undermine confidence and the predictability of economic policy.
The country is already reeling from the resignation of Finance Secretary Jose Isidro Camacho, a senior figure in Mrs. Arroyo’s Cabinet who was highly respected in international financial circles.
Other economic officials are also expected to resign in the coming weeks, possibly so they can run for lower positions in the May polls.
Miguel Varela, chairman of the Philippine Chamber of Commerce and Industry, the country’s main business group, said the business community was not throwing its weight behind any single presidential candidate.
"As much as possible we want to be apolitical but we want to hear their platform," he said.
David Cohen of Singapore-based financial consultancy MMS International said that economic progress "will pause amid the heightened uncertainty, particularly investment spending by foreigners."
But he said this would only be "a temporary freeze rather than a serious negative consequence."
Cohen warned that "the peso will remain under pressure from political uncertainties," but said the economy would post a respectable four-percent growth this year although it may be outpaced by its Asian neighbors.
Concerned that the early politicking will hurt growth prospects, President Arroyo has been urging the public to re-focus on the economy.
"It would help much if people can shake off their election fever and get on with more productive endeavors," Mrs. Arroyo remarked. – AFP