The results of the May 12 midterm election could influence the government’s reform agenda, in particular its monetary and fiscal policies, given the political alignment of the newly elected officials, analysts said on Wednesday.
Analysts from Japan’s Nomura Global Markets Research said a strong win by the opposition is likely to put unpopular government reforms on the back burner for the remainder of their six-year term.
“On policy implications, it could become more difficult for the Marcos government to push unpopular fiscal reforms, as we have started to see,” a Nomura report by analysts Euben Paracuelles and Nabila Amani said.
They added, however: “Infrastructure implementation and supply-side measures to keep inflation low will likely remain the government’s focus.”
“We reiterate our forecast for Bangko Sentral ng Pilipinas (BSP) to cut (rates) by an additional 75 basis points this year, taking the policy rate to a below-neutral 4.75 percent,” the report said.
Paracuelles and Amani said, with most of the votes counted, opposition candidates endorsed by Vice President Sara Duterte are on course to win five of the 12 senatorial seats.
“Two independents also won, outperforming surveys. It appears only five seats were won by administration candidates, a weaker outcome than in 2019, when pro-government candidates dominated,” the Nomura analysts said.
“With the Senate holding an impeachment trial against VP Duterte, the likelihood of her acquittal may have risen significantly,” they said.
Confidence booster
RCBC’s chief economist, Michael Ricafort, said “the generally peaceful midterm elections partly led to increased market confidence.”
Following the election, the bellwether PSEi hit a new four-month high since Jan. 6, 2025, and erased the losses since Trump’s inauguration on Jan. 20, 2025.
“Treasury bill auction yields slightly eased after the generally peaceful election results. (This) points to lower borrowing costs for the government,” Ricafort said.
The election results, especially at the House of Representatives and at the Senate, “would determine the level of support for the administration for the next three years to pass various reform and other priority measures that require legislation,” Ricafort said.
“Reforms such as economic, fiscal, and other reforms that improve the conduciveness of the country’s environment for more business activities, investments, and other economic opportunities are needed,” he said.
“These reforms support long-term economic growth and development that is more inclusive and lifts more people from poverty,” he added.
Key measures
John Paolo Rivera, a research fellow from the Philippine Institute for Development
Studies, said monetary policies “should continue as the BSP (Bangko Sentral ng Pilipinas) leadership remains and should always be independent.”
“Stance can change depending on the circumstances of the economy brought about by outcomes of programs and legislation to be made by the incoming Congress and Senate,” Rivera said.
Rivera said the BSP may see a continued slowdown in inflation with “room to accelerate its policy easing, but fiscal and structural policies must also step up to stimulate domestic demand and support growth.”
