Worsening political fragmentation in the Senate is emerging as the premier threat to the country’s macroeconomic stability, risking a prolonged period of stagflation as legislative gridlock deepens, according to GlobalSource Partners Inc.

In a June 2 commentary, GlobalSource economist Diwa Guinigundo warned that institutional dysfunction within the upper house of Congress could trap the domestic economy in a cycle of sluggish growth and accelerating consumer prices.

“Stagflation is increasingly becoming a likely scenario if this political dynamic further deteriorates,” Guinigundo, who previously served as a Bangko Sentral ng Pilipinas (BSP) deputy governor, said.

This comes against the backdrop of strategic absenteeism and partisan retaliation following the recent Senate coup, Sen. Bato Dela Rosa’s dodge of the International Criminal Court’s (ICC) arrest, and Sen. Jinggoy Estrada’s arrest over his plunder case.

Guinigundo explained that economic standing is closely linked to the performance of democratic institutions. “Markets do not respond only to economic indicators. They also respond to political coherence, institutional credibility, and policy stability,” he said.

“Unfortunately, the Philippine economy could become the largest collateral damage,” Guinigundo said, pointing to the recent leadership reshuffling and the impeachment battle against Vice President Sara Duterte.

He explained that when a Senate is divided, reactive, and vulnerable to political pressures, this heightens uncertainty, especially when the economy faces a mix of fiscal pressures, surging inflation, and lackluster growth.

GlobalSource noted that what may appear as isolated political dramas—including the impeachment battle and the rumored migration of majority senators into the minority—are actually “converging signals of institutional instability.”

Guinigundo also pointed out the lack of progress in the legislative process, noting that the refusal of the majority bloc to attend the plenary was viewed as a calculated move where “numbers, alliances, and tactical withdrawal now matter more than institutional continuity and legislative responsibility.”

As the Senate operates through partisan retaliation, Guinigundo warned that “investors begin to question institutional predictability,” turning business sentiment more downbeat and cautious.

He also pointed out a tendency toward political protectionism, where political groups rally behind their allies even when they face serious allegations related to public accountability.

Other than a leadership change, Guinigundo said the eventual casualty could extend to the country’s “economic stability, democratic legitimacy, and long-term national cohesion itself.”

Domestic growth clocked in at a five-year low of 2.8 percent in the first quarter of 2026, while inflation stood at a three-year high of 7.2 percent in April. Both prints significantly missed the government’s macroeconomic targets.