Political unrest may delay reforms – ING

POLITICAL turbulence and economic uncertainty could stall key reforms recently passed by the government, ING said.

"The recent arrest of former president Rodrigo Duterte for alleged crimes against humanity has sparked concerns about its potential impact on the upcoming mid-term elections in the Philippines," the Dutch banking and financial services firm said.

"While mid-term elections typically do not signify major policy shifts, this development could heighten political uncertainty," ING added.

It noted that the Duterte family's political faction was working to secure Senate seats to protect Vice President Sara Duterte's position and ensure her eligibility for the 2028 presidential race.

Sara, the former president's daughter, is facing an impeachment trial that could permanently bar her from holding public office.

The political unrest surrounding the high-stakes power struggle, ING said, could divert attention from economic reforms and governance priorities.

"There's a possibility that the implementation of certain reforms that were recently passed gets delayed," it said.

ING noted that the Senate recently passed bills that aim to cut the stock transaction tax and overhaul the mining tax system — moves welcomed by financial markets.

"These bills were seen to be financial market-friendly but could be delayed with the renewed focus on politics," it said.

"Moreover, the proposed daily minimum wage hike of P200 — which sparked significant debate around how the wage hikes could work to the detriment of businesses and consumers — could be pushed to the back burner as well," it added.

Still, ING said that it did "not expect the political climate to impact the macro stability narrative, given that our forecasts suggest contained inflation and moderating fiscal deficits."

With inflation stabilizing within the central bank's target range and a sharp decline in global rice prices yet to be fully reflected in domestic markets, ING said that monetary easing was expected to continue.

It projected three rate cuts throughout the year totaling 75 basis points, with the first cut likely to be implemented in April and followed by two more in September and December, contingent on signals from the US Federal Reserve.

"The current real policy rates continue to remain close to an all-time high and are some of the highest in the region," ING said.

However, amid global uncertainty, ING said the "timing of the rate cuts is expected to be more gradual and measured than previously anticipated, influenced in part by the Federal Reserve's actions."

It said that the BSP's three rate cuts last year, including the aggregate 450-bps cut in reserve requirement ratios since September 2024, had significantly relaxed policy conditions.

"Enhanced monetary policy transmission and increased credit growth provide the BSP with the flexibility to delay rate cuts until later in the year when there is more clarity on tariffs and Fed rate cuts," ING said.