Traders are preparing for a long, hard slog as the corruption scandal is expected to make its most painful impact in the first quarter of next year, as investors freeze their infusions into the country.

The adverse effects of the outrageous ransacking of the budget are being muted at the moment by the traditional Christmas spending.

Economists said it is not only foreign investors who are hesitant to invest amid the political instability, which is expected to worsen, particularly following the blow to the ICI’s credibility caused by the resignation of former public works secretary Babes Singson.

Foundation for Economic Freedom (FEF) president Calixto Chikiamco said the economic situation will worsen due to the US-imposed 18-percent punitive tariff.

The business sector is even concerned about a slowdown below 4 percent by the first quarter, as the investigations into government projects have drastically reduced public spending, a major driver of the economy.

“Consumers, especially after Christmas, will remain very cautious. And a recent government report says manufacturing has also slowed down,” Chikiamco noted.

Reduced factory output will be particularly troubling, as it will lead to layoffs and further dampen consumption, which accounts for about 60 to 70 percent of the gross domestic product (GDP).

Overall business confidence is plunging on the perception that President Ferdinand Marcos Jr. has failed, according to the economic guru, “to steady his administration’s ship and bring back trust.

“I think in terms of agriculture, Marcos has failed to do the needed structural reforms. The program has been to sell 20 pesos per kilo rice, which I think is wrong. What we need to do is remove protectionism in agriculture, liberalize food imports, but have the exchange rate maybe as a protection for our farmers.”

The situation of the poorest Filipinos will not improve. While the statistics show growth, the condition of ordinary Filipinos will remain stagnant, as the remaining gains from the small expansion will largely accrue to the elite. The immediate need will be to put food on the table, with other expenses set aside, which will be disastrous for retailers of items other than food.

The economic slowdown will create more political instability that will contribute to further weaken the economy. “So that is a downward spiral toward we don’t know where,” Chikiamco warned.

”We are having a unique moment in which all institutions have been discredited. It’s Congress, the Senate, the Commission on Audit, the Department of Budget and Management, all,” he lamented.

“All of them, even the presidency, have been tarnished by this massive graft and corruption scandal. So, with all institutions being discredited by this scandal, will foreign investors still have trust in our country?”

From the perspective of business leaders who are among the first to feel the impact of an economic slump, when corruption is endemic, it is like a cancer that eats away at the fabric of society.

“Because our institutions have become dysfunctional, investors will think twice or thrice before deciding to release their capital.”

As an ultimate solution, a radical shift that can be achieved through a change in the Constitution has been proposed by Chikiamco.

He said an anti-dynasty bill or any other measures against corruption will not be the solution.

“You know, our economy is structurally weak. So what really needs to be changed are parts of the Constitution to be able to root out corruption,” he said.

Needless to say, to initiate such a change, confidence is needed, which the current administration has squandered.