What the world seemed to miss is that the stock market didn't plunge, the peso didn't collapse and bond yields didn't shoot up. And people here in the Philippines didn't panic.

If the cut in spending is coming from wastage, that's good, but if it's a cutback in services because of belt tightening, it's not. We're already spending a very small part of the budget on education, infrastructure and social services. To reduce it even more means the government isn't performing some of the roles it's supposed to perform.

The transmission mechanism for inflation from political instability is usually through the exchange rate. However, this time around, the peso quickly recovered and I would expect it to remain strong for the rest of the year based on continuing structural economic reforms.

What we are seeing now is that consumption is getting hit by higher oil prices and the political fallout. This is a reflection of the pessimism that prevailed during the quarter because of the political situation.

I expect continued weakness in exports because we are losing our market share.

We still saw growth last year even with higher oil prices. Countries have adjusted, with interest rates still low and structural reforms proceeding. Risk premiums continue to fall, making stock markets more attractive.