Impeachment complaints: Not exactly bad timing

At first glance, the impeachment complaints filed against President Ferdinand Marcos, Jr. and Vice-President Sara Duterte appear ill-timed. With 2025 growth sharply undershooting expectations and 2026 prospects softening, politically explosive moves risk amplifying uncertainty. That concern is understandable but ultimately misplaced.

What defines the growth moment is not just the magnitude of the slowdown in 2025, but the nature of the forces driving it. In fact, the slowdown and its causes reinforce each other. Ignoring one in favor of the other misses the point.

The growth deceleration is stark: the weakest since the pandemic, occurring precisely when faster growth is needed to absorb labor slack. Unemployment and underemployment are rising, job quality has deteriorated, and pandemic scarring has yet to be fully reversed. This alone would be troubling. But the anatomy of the slowdown makes it more so.

Household consumption, the backbone of the economy, has weakened. Although inflation eased in 2025, this largely reflects disinflation from elevated levels. Absolute prices of food, transport, and utilities remain high, continuing to erode real incomes. Combined with a soft labor market, this has inevitably dampened private consumption, which accounts for over 70% of GDP.

More alarming is the collapse in investment momentum. Gross domestic capital formation declined outright, a rare and serious signal of weakening confidence. Foreign direct investment fell sharply by 40% year on year in October 2025, underscoring investor unease. This matters not simply because investment comprises more than one-fifth of GDP, but because it anchors productivity growth, labor absorption, and future capacity. Weak investment today locks in weaker growth tomorrow.

External trade has offered some relief, but its contribution is neither strong nor secure. Export growth has benefited from higher global demand for electronics, machinery, transport equipment, and selected agro-based products. Yet part of this rebound reflects front-loading ahead of anticipated US tariff increases, as well as temporary tariff exemptions and trade facilitation measures. Imports moderated, but this is not an unambiguous positive. Philippine exports are structurally import-dependent; slower import growth now may constrain export performance ahead. Net exports, moreover, remain a drag on real output.

At the center of these dynamics lies a deeper issue: confidence — not in policy intent, but in policy execution.

The Philippines is not short of growth strategies or reform blueprints. What is binding is the failure to implement them cleanly, predictably, and at scale. The investigation into flood control anomalies and the creation of an independent infrastructure commission have coincided with a freeze in public works execution. Public consumption provided only marginal support, driven mainly by government employment and operating expenditures, not by productivity-enhancing investment.

This context frames two familiar but incomplete interpretations of the country’s growth problem.

One emphasizes structural weaknesses: deindustrialization, weak tradables, persistent external imbalances, high real interest rates, and a fragile, services-heavy growth model. Policy incoherence and limited state capacity, in this view, explain why growth has been neither durable nor inclusive.

This diagnosis is largely correct but insufficient. By treating policy failure as technocratic error, it abstracts from politics. In reality, these failures are not neutral. Deindustrialization reflects regulatory capture, selective protection of entrenched interests, chronic budget misallocation, and uneven enforcement of competition policy. Agricultural stagnation stems from rent-seeking in import controls, politicized price interventions, and corruption in subsidy and incentive systems. These distortions persist because they are politically rewarded.

Policy errors matter but so does explaining why reform remains elusive here while it has succeeded elsewhere.

The other critique argues that focusing on corruption is analytically convenient, allowing reformists to avoid harder questions about power, oligarchy, and foreign dominance.

We reject the notion that corruption is secondary. In the Philippine context, corruption and weak governance are the binding constraints that prevent even democratic-developmental reforms from being seriously considered, much less implemented. Industrial policy has failed not because it is absent, but because subsidies are captured, protection becomes permanent, and project selection is politicized. East Asian comparators were not governance-pure, but they possessed enforcement capacity. In Korea and Taiwan, senior politicians and industrialists went to jail. That distinction is decisive.

Democratic institutions, as currently structured, often transmit clientelism rather than discipline. Governance alone does not guarantee development, but bad governance can decisively block it.

This brings us to the question of whether the current slowdown reflects a temporary confidence shock or the onset of structurally lower growth. The answer is both. Confidence has been damaged by persistent governance failures, as reflected in business surveys and investor behavior. At the same time, chronic underinvestment in infrastructure, education, health, and state capacity leaves the economy structurally ill-prepared for accelerated, inclusive growth.

It is against this backdrop that the impeachment complaints should be assessed.

The House Committee on Justice found the impeachment complaints against the President sufficient in form but lacking in substance. While some dismiss the process as a numbers game, the allegations — corruption and graft, abuse of authority, constitutional violations, and betrayal of public trust — were serious. Had they proceeded, a Senate trial could have provided a formal venue for accountability and clarification. That said, prolonged proceedings against a sitting president carry risks: legislative paralysis, political grandstanding, and further erosion of confidence. Speed and procedural discipline would have been essential.

The impeachment complaints against the Vice-President are more expansive. They allege misuse of confidential funds, failure to submit to budget oversight, corruption, threats against public officials, unexplained wealth, and other high crimes. As Senator JV Ejercito noted, dual impeachment proceedings at the top of government can signal instability. Political uncertainty can weigh on markets, foreign investment, and the currency. Even without removal, impeachment may be perceived as regime risk.

Yet it is analytically wrong to assume that impeachment necessarily worsens uncertainty. When handled transparently and decisively, it can demonstrate that accountability mechanisms are real, that due process applies even at the highest levels. Markets are often less forgiving when institutions appear unwilling or unable to enforce rules consistently.

In that sense, the timing is not exactly bad. What would be worse for growth, confidence, and democratic legitimacy is the perception that accountability exists only on paper, and that governance failures are tolerated when they reach the top.

If accountability mechanisms weaken or stall, whether through premature dismissal, procedural delay, or political accommodation, the risk is not simply reputational. The economic consequences would be tangible and compounding.

For instance, when credible allegations at the highest levels are neither decisively prosecuted nor convincingly dismissed, risk premiums rise not abruptly, but persistently. Capital does not flee in panic; it reallocates quietly. The result is not crisis, but stagnation: fewer long-term projects, shorter planning horizons, and a bias toward low-commitment, low-productivity activities.

Public investment efficiency also deteriorates. If the current investigations do not yield accountability at high levels or culminate in clear institutional correction, bureaucratic paralysis becomes rational behavior. Delays, under-execution, and cost overruns become entrenched, further weakening growth.

Fiscal space erodes without drama. Weak growth and inefficient spending reduce revenue buoyancy while raising social demands, leaving less room to respond when the next external shock arrives.

Labor market damage hardens. Weak investment constrains job creation and locks the economy into low-productivity services, making recovery increasingly difficult.

Even democratic credibility carries economic consequences. When enforcement appears selective, trust erodes. Households become cautious, firms defer risk, and savings rise defensively — outcomes that matter in an economy where domestic demand is the primary growth engine.

Seen in this light, impeachment is not the shock. Ambiguity is.

This by no means suggests impeachment is costless. Poorly handled, it can deepen polarization, distract Congress and the Palace, and unsettle markets. But the greater risk lies in signaling that the political system is incapable of confronting credible allegations at the top — either by clearing them decisively or by enforcing accountability.

The choice, then, is not between stability and accountability. It is between managed accountability and unmanaged decline.

Handled swiftly, transparently, and within constitutional bounds, impeachment can function as a credibility reset, demonstrating that governance risks are not merely discussed, but addressed. In an economy already constrained by weak execution and fragile confidence, that signal may matter more than short-term political calm.

In that sense, the timing is not merely acceptable. It may be decisive.

Diwa C. Guinigundo is the former deputy governor for the Monetary and Economics Sector, the Bangko Sentral ng Pilipinas (BSP). He served the BSP for 41 years. In 2001-2003, he was alternate executive director at the International Monetary Fund in Washington, DC. He is the senior pastor of the Fullness of Christ International Ministries in Mandaluyong.