When waist-deep water flooded several Metro Manila districts earlier this year, many residents chalked it up to another monsoon season gone wrong.
But when documents, whistleblower accounts, and internal reports surfaced weeks later — alleging kickbacks, rigged bidding, and “ghost” contractors in multimillion-peso flood-control projects — the story quickly shifted. What once seemed like a failure of infrastructure began to look like a failure of governance.
The controversy also revived long-standing concerns about corruption and how deeply it affects public systems and economic stability.
For investors, it was more than a scandal. It was confirmation of a risk they had long priced in.
Corruption as a Structural Economic Risk
Analysts say corruption scandals in the Philippines are rarely treated as isolated incidents. Instead, global markets see them as symptoms of deeper institutional weaknesses — issues that shape long-term perceptions of political risk, regulatory reliability, and the overall business environment.
Recent assessments reflect this.
BMI Fitch Solutions projects the peso will end 2025 at ₱59 per US dollar, further weakening to ₱59.50 in 2026, partly due to governance concerns that cast doubt on policy stability and public spending efficiency.
“The corruption scandal will dampen foreign direct investment inflows into 2026,” BMI said in its latest research paper. “FDI inflows as a share of GDP fell to just 1.3 percent in the second quarter this year, far lower than the 2.5 percent pre-pandemic average,” the Fitch unit said.
Similarly, ING Global Research warned that the peso is likely to “stay weak through 2026,” pointing to persistent downside risks including political uncertainty, global headwinds, and corruption-related market skepticism.
These findings align with longstanding observations from institutions like the World Bank and Asian Development Bank, which have repeatedly emphasized that governance issues and corruption raise borrowing costs, reduce competitiveness, and diminish investor trust.
How Corruption Gets Priced Into the Peso
Economists note that corruption directly affects currency performance by influencing risk premiums and investment decisions.
When governance scandals surface, investors reassess risks related to:
- budget execution and fiscal discipline
- transparency in procurement
- infrastructure quality and project reliability
- policy continuity
- political stability
Higher perceived risks increase the cost of capital, discourage long-term foreign direct investment, and push funds toward regional peers with stronger governance indicators. This reduces peso-supportive inflows and contributes to downward pressure on the currency.
Analysts add that corruption also increases “economic leakage” — government resources that fail to convert into productive assets — weakening growth potential over time.
The Ground-Level Impact of a Weakening Peso
Both industry groups and consumer advocates have raised concerns about the peso’s slide.
For businesses, especially those dependent on imports, even small fluctuations in the exchange rate raise costs for fuel, machinery, construction materials, and essential inputs. Manufacturers and import-reliant SMEs say peso weakness often leads to compressed margins, faster price adjustments, and delayed expansion plans.
For households, depreciation translates into:
- pricier imported food and goods
- higher fuel and transport costs
- potential increases in electricity rates
- elevated inflation risks
Economists warn that if the peso’s weakness persists through 2026, consumer purchasing power could remain under pressure, slowing domestic demand — a key growth driver for the Philippines.
November 30 Demonstrations: A Political Signal to Markets
The planned nationwide protest on November 30, driven by public frustration over the flood-control scandal and recurring corruption issues, is also being closely watched by analysts.
While demonstrations are expected in a democratic society, markets pay special attention when they signal growing dissatisfaction with governance and institutional accountability. Protests related to corruption tend to draw heightened scrutiny from investors because they reflect broader concerns about stability, policymaking cohesion, and political risk.
Analysts say investor sentiment often becomes more cautious when corruption controversies coincide with large-scale mobilizations, as this combination suggests that public pressure may intensify before structural reforms take place.
What Could Change the Trajectory
Experts point to several reforms that could help stabilize sentiment and support the peso:
- transparent and timely investigations into public spending
- stronger enforcement against procurement irregularities
- open publication of audit findings
- modernization of digital procurement systems
- consistent communication of fiscal and governance measures
- oversight mechanisms for infrastructure projects
Institutions such as the World Bank, IMF, and ADB have repeatedly recommended these measures as essential steps to restoring investor confidence and reducing governance-related risk premiums.
A Governance Story, Not Just a Currency Story
The peso’s projected weakness through 2026 reflects more than macroeconomic dynamics — it reflects the cost of governance lapses that markets have long factored into their models. The flood-control scandal is only one example of how corruption reverberates far beyond political headlines, affecting everything from infrastructure quality to investor confidence, market forecasts, and everyday expenses.
Whether the peso stabilizes sooner will depend heavily on whether the Philippines can address corruption not as an episodic political issue, but as a structural economic threat that demands sustained institutional reform.
