World Bank economists watching the Philippines are closely monitoring the unfolding political drama involving two successive administrations and how it would impact on the economic reform agenda.

So far, "while the political tension in the country has recently increased, no major influence on the economy is expected at this stage," the World Bank said in its Philippines Monthly Economic Developments report for November 2024, published on Dec. 4.

For the World Bank, one domestic development to watch included ongoing political tensions, referring to the public spat between the camps of President Ferdinand R. Marcos Jr. and Vice President Sara Z. Duterte-Carpio, including her father, former president Rodrigo R. Duterte.

"How will increasing political tensions ahead of the midterm elections affect economic sentiment and the government’s policy agenda?" the World Bank's Philippine office said, referring to the forthcoming national and local polls in May 2025.

To recall, big business and civil-society groups last week cautioned the Armed Forces of the Philippines (AFP) against rebelling versus the current Marcos Jr. administration after ex-president Duterte sought military and police action over an allegedly "fractured" government.

Amid intensifying conflict between the Dutertes and Marcos Jr. administration officials, especially their allies in Congress, 13 organizations that are "committed to the rule of law" had said in a joint statement that they were "profoundly concerned over recent statements and actions that threaten the stability of our constitutional order and country."

"The resolution of political disagreements must adhere to legal and democratic processes. Resorting to threats, incendiary rhetoric, or any form of violence has no place in a nation founded on the rule of law," the organizations had said.

In this regard, the groups had called upon all public officials and political leaders -- especially the AFP as it safeguards the Constitution, to exercise restraint, uphold the dignity of their offices, and prioritize the well-being of the Filipino people over partisan interests.

Vice President Duterte is now facing impeachment complaints lodged by lawmakers from the Lower House and militant groups, even as Albay Rep. Joey Salceda told a breakfast forum last Tuesday, Dec. 3, that such political exercise would unlikely prosper.

"There will be no impeachment. We will follow the advice of the President," said Salceda, who chairs the House ways and means committee from where tax and fiscal bills emanate.

President Marcos Jr. had reportedly urged House leaders, through a text message later leaked to the public, to refrain from impeaching the Vice President.

According to the President, impeachment proceedings targeting his running-mate during the 2022 elections "will only distract us from the real work of governance, which is to improve the lot of all Filipinos."

Last week, National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan maintained that it's "business as usual" despite political "noises" such as that wrought by the deepening Marcos-Duterte rift.

Besides political developments, the World Bank is likewise monitoring the impact of the string of strong typhoons that battered the country from October to November on local industrial and production activities.

Just last Monday, the Cabinet-level Development Budget Coordination Committee (DBCC) narrowed its 2024 gross domestic product (GDP) growth target range to six to 6.5 percent, from a more ambitious six to seven percent previously, as end-September economic expansion averaged only 5.8 percent following the 5.2-percent third-quarter outturn tempered by bad weather.

The World Bank noted that factory output, as measured by the volume of production index (VoPI), last September shrank due to "weak" global trade that slowed domestic manufacturing of electronics, machinery as well as transport equipment.

"Production of refined petroleum products also contracted amid the continued increase in refining capacity in China putting pressure on local petrochemicals players. China is a top market for Philippine exports and imports of refined petroleum and petrochemical products," the Washington-based multilateral lender added.

While the Philippines' purchasing managers' index (PMI) continued to grow as the highest in the region, the report pointed to concerns about upward input prices on the back of a lack in raw materials, lengthier lead times from suppliers, as well as a weaker Philippine peso, which had dropped to the 58-to-59:$1 level.

"As in other emerging markets, the peso continued to weaken against the US dollar and the stock market declined due to political and policy uncertainty abroad. While the central bank has space to continue monetary policy easing given within-target inflation and a strong external position, implications of the increased global policy uncertainty need to be carefully monitored," it said.

The World Bank deems that "short-term exchange rate fluctuations are not seen likely to influence monetary policy settings."

Referring to Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr., the World Bank cited that he had "indicated the possibility of further peso depreciation, noting that only significant and sustained swings in the exchange rate would warrant consideration by monetary policymakers" to either continue or pause the policy easing cycle when they next tackle the key interest rate on Dec. 19.

In particular, the World Bank is on the lookout if any sustained peso weakness during the near term would affect headline inflation, input costs and domestic manufacturing production.