Financial markets weather impact of martial law – ING

MANILA, Philippines - Dutch financial giant ING Bank said the political impact on the financial markets is likely to remain low a week after President Duterte declared martial law in Mindanao as government forces continued to run after terrorists.

Joey Cuyegkeng, senior economist at ING Bank Manila, said investors continued to focus on the country’s strong macroeconomic fundamentals.

“Nevertheless, markets continue to focus on the strong economic fundamentals and the limited impact of the hostilities to overall economic activity,” he said.

The peso briefly touched the 50 to $1 level immediately after President Duterte declared martial law last May 23 due to a series of attacks made by members of the Maute Group in Marawi City.

“These are unlikely to be affected for now by the declaration of martial law and the threat to bring this to central and north Philippines,” he said.

President Duterte issued Proclamation No. 216 “Declaring a State of Martial law and Suspending the Privilege of Writ of Habeas Corpus in the Whole of Mindanao.”

He pointed out a constitutional crisis may develop if the Supreme Court or Congress decides that martial law has to be lifted or its scope reduced.

He said the President last weekend threatened not to listen or obey the decision of the Supreme Court or Congress and would prefer to listen to the security forces.

“Market is not taking the potential constitutional crisis seriously since Congress is likely to support the decision of the President. Constitutional challenge to the declaration has not been filed with the Supreme Court,” Cuyegkeng said.

According to him, the government stance against terrorism has been supported not only by the government’s coalition but also members of the opposition and also by the Vice President Leni Robredo.

Likewise, he added the fight against illegal drugs has also received widespread support.

The country’s gross domestic product (GDP) growth slowed down to 6.4 percent in the first quarter from 6.6 percent in the fourth quarter of last year due to weaker-than-expected private consumption.

Economic managers see the country’s GDP growth ranging between 6.5 and 7.5 percent this year after accelerating to 6.9 percent last year from 5.9 percent in 2015 as election related spending boosted consumption and led to higher investments.

Earlier, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the declaration of martial law could result to temporary cautiousness among investors.

“I think it is a very decisive move on the part of government and the main objective is to improve the security as well as peace and order situation which should lead to even greater confidence down the road,” he said.

He added the decision would have positive impact on investors’ sentiment.

“There may be some transitory or temporary cautiousness but in the end it will lead to positive impact on sentiment,” Tetangco said.