The flow of investments will not be affected by the declaration of “state of lawless violence” by President Rodrigo Duterte, following a bombing in Davao City that left 14 people dead over the weekend, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said Tuesday.
Tetangco said the objective of the president’s move was apparently to improve peace and order in the country which would be effective for investments over the long term.
“If you look at market behavior so far yesterday and this morning, we have not seen any negative market reactions. Yesterday, actually the peso strengthened against the dollar and today it is rangebound,” Tetangco said at the sidelines of Euromoney’s Philippine Investment Forum at Shangrila Hotel at the Fort in Taguig City.
“So there has been no negative reactions as far as the foreign exchange market is concerned,” Tetangco said.
The peso closed at 46.60 against the US dollar Tuesday, down from 46.52 against the greenback Monday. The Philippine Stock Exchange index, the 30-company benchmark, dropped 44 points, or 0.6 percent, to close at 7,719.18 Tuesday.
Tetangco said the financial markets could be influenced more by developments overseas. “So it is externally driven at this point. Also in the equity market, there has been no major selloff,” he said.
Tetangco said the government should explain better the objectives of its policies to avoid any possible misunderstanding. “We must avoid the lack of information that could lead to a different picture,” he said.
ING Bank Manila senior economist Joey Cuyegkeng warned that the peace and order situation, particularly the spate of extra-judicial killings and bombing in Mindanao, could have a significant dent on the markets and economy if not checked at once.
“We believe that such political developments and concerns if unchecked would have more profound impact on markets and the economy,” Cuyegkeng said in a report Tuesday.
“For now, the impact is likely to be marginal and is likely to be offset with favorable macro-economic fundamentals – structural inflows, high foreign exchange reserves, strong domestic demand and monetary and fiscal leeway,” Cuyegkeng said.
Cuyegkeng said concerns over extra-judicial killings and statements that might antagonize long-time allies were also making international news which elicited growing concerns also from investors.
He said the Davao City bomb blast last week highlighted the possibility of increased terrorist activities in the country.
“The declaration of state of lawlessness by the president was seen also from a risk standpoint that the government needs assistance [by calling on the military] for the national police to counter the perceived state of lawlessness, which some say was also a result of government statements that may have encouraged vigilante killings,” Cuyegkeng said.
Economic managers said the Duterte administration’s economic agenda remained intact, and the declaration of state of lawlessness by the president after the bombing should be welcomed by investors because it showed the president’s decisiveness as a leader.
Cuyegkeng confirmed that growth prospects remained favorable and macroeconomic fundamentals, which serve as the foundation for sustained growth, continued to be solid and strong.
He cited the growth of domestic liquidity, ranging from 10 percent to 15 percent, that was not inflationary while being supportive of economic activity. Liquidity grew 13.1 percent in July while loan growth was steady at 17.7 percent.
The Duterte administration expects economic growth this year to settle within the 6 percent to 7 percent target range, anchored mainly on increased fiscal spending, robust domestic demand and higher investments.
The gross domestic product grew 6.9 percent in the first half, near the upper bound of the government’s target range.
