I would think it is the console output. But I don't see errors showing up in console when they are supposed to - terminal version of tomcat shows errors in catalina.out for the same actions that I am reproducing for Eclipse run Tomcat.
It turned out that the application had logback.xml configured trying to emit logs in some location but the path specified was a relative path instead of a full path and Eclipse's Tomcat was not able to use that relative path (not sure exactly why), but replacing relative path in logback.xml with a full path started emitting logs at ".metadata/..." in the workspace directory.