The plunge of the Philippine Stock Exchange Index (PSEi) to a three-year low is more than just a numerical milestone; it is a stark signal that the economy is entering a bear market.

Characterized by a decline of 20 percent or more from recent highs, a bear market represents a profound shift in investor sentiment from optimism to deep-seated pessimism.

For ordinary Filipinos and a government embroiled in a corruption crisis, this economic downturn presents a formidable challenge, demanding resilience and decisive action in the face of a gathering storm.

Under a bear market, several scenarios typically unfold, creating a negative feedback loop that dampens economic activity.

The most direct scenario is the erosion of wealth. As stock prices fall, the investment portfolios of individuals, pension funds, and corporations shrink.

This “negative wealth effect” causes people to feel less financially secure, leading them to rein in spending. For a consumption-driven economy like the Philippines, this is a severe blow.

Companies, facing lower revenues and a gloomy outlook, will postpone expansion plans, freeze hiring, and may resort to layoffs to preserve capital. The rise in unemployment will suppress consumer spending, creating a vicious cycle.

Further, businesses will find it harder and more expensive to raise capital through new share offerings, stifling innovation and growth just when it is needed most. (The current surge in trading volume, paired with overwhelmingly negative market breadth, is a classic symptom of this panic and risk aversion. Huh??)

For the ordinary Filipino, the abstract concept of a bear market translates to tangible hardships.

The investor with a modest stock portfolio sees his savings diminish. The factory worker faces uncertainty about job security. Small businessmen are confronted with higher interest rates on their loans as the Bangko Sentral ng Pilipinas (BSP) may be compelled to keep rates high to combat inflation and defend the peso.

The weakening currency — a key factor in this downturn–makes imported goods from fuel and grains to essential medicine more expensive, squeezing household budgets that are already strained.

In essence, a bear market’s chill permeates daily life, exacerbating the existing pressures from inflation and leading to a lower standard of living for the majority.

In this precarious moment, the role of the government is paramount. However, its capacity to act is severely hampered by the “major corruption crisis” cited.

A government wrapped in scandal suffers from a crippling deficit of trust, both domestically and internationally. Investors, already skittish, are wary of pouring capital into a country where governance is perceived as weak and funds may be misappropriated. This crisis could not have come at a worse time.

What can the government do? The path forward requires a two-pronged approach: immediate economic stabilization and the urgent restoration of integrity.

Economically, it must work in lockstep with the BSP to ensure policy coherence. While the BSP tackles inflation and currency stability, the government must implement targeted, transparent fiscal measures. These include well-designed social amelioration programs to protect the most vulnerable from the impacts of inflation and unemployment, and infrastructure spending that is efficient, productive, and free from graft.

Yet, no economic plan will succeed without confronting the corruption crisis head-on.

The government’s first and most critical task is to demonstrate an unwavering commitment to transparency and accountability. And an unequivocally concrete move to quash corruption. This means allowing independent investigations, prosecuting wrongdoers regardless of their positions, and instituting concrete reforms to seal loopholes in public procurement and budgeting.

Restoring trust is not a peripheral issue of politics; it is a central pillar of economic recovery. A credible government can calm markets, attract long-term investment, and assure its citizens that public funds will be used for the public good.

The convergence of a bear market, inflationary pressures, and a governance crisis creates a “perfect storm” for the Philippines. The road to recovery will be arduous. Ordinary Filipinos must brace for a period of economic difficulty while the government stands at a critical juncture. Its ability to steer the economy through this turmoil will depend entirely on its courage to clean up its own house, to prove that in the face of a storm, its anchor is in having integrity, over and above power.

“What’s happening,” remarked a prominent businessman who requested anonymity, “basically boils down to a waning confidence in the local economy owing to a tepid administration seemingly avoiding to resolutely address the huge corrupt mess it is mired in, and boldly reform both systemic corruption and weaknesses in government.

“The opportunity to finally redeem your tarnished surname is now, Mr. President. Take courage and be a traitor to your ilk and own class just like Teddy Roosevelt and FDR (Franklin Delano Roosevelt; both from old wealth and privilege but who believed America’s real strength lay in supporting and furthering the middle and working classes, a perspective that their wealthy critics saw as a betrayal of their own social standing).”