The ongoing turmoil in the Senate threatens institutional credibility and the overall stability of the Philippine economy, adding to an already risk-heavy outlook, according to former Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo.

In a 2 June commentary, the economist said markets closely monitor “political coherence, institutional credibility and policy stability,” warning that a deteriorating political environment could push the country closer to stagflation.

“A Senate perceived as divided, reactive, and vulnerable to political pressure creates uncertainty precisely when the country faces elevated fiscal pressures, persistent inflation concerns, weak productivity growth, and growing external risks. Stagflation is increasingly becoming a likely scenario if these political dynamics further deteriorate,” he said.

The Upper House has become the focus of national attention in recent weeks following a series of political developments that have deepened divisions within the chamber.

Guinigundo said the impeachment of Vice President Sara Duterte, the sudden reconfiguration of Senate leadership, reports of majority senators shifting to the minority bloc, the dramatic return of Ronald dela Rosa amid continued scrutiny from the International Criminal Court, and confusion surrounding the alleged “attack” on the Senate complex are “converging signals of institutional instability” that could undermine economic confidence.

“Citizens begin to doubt whether accountability mechanisms still function fairly. Investors begin to question institutional predictability. The business community becomes more cautious. Social cohesion deteriorates. Public policy loses legitimacy because the institutions crafting it no longer command broad trust. Unfortunately, the Philippine economy could become the largest collateral damage,” he said.

Data from the BSP have shown generally pessimistic sentiment among both businesses and consumers since October last year.