'Failed coup a setback for economy'

'Failed coup a setback for economy'

Teresa Cerojono, Associated Press, Manila

A failed military mutiny over the weekend will have a long- term negative impact on the country's struggling economy and scare away foreign investors, the finance minister said on Wednesday.

The immediate impact, though, on currency and stock markets was not as bad as the government anticipated, Finance Secretary Jose Isidro Camacho said.

"What's more worrisome is the longer term effect of the mutiny," he told DZRH radio station. "There can be no denying that the mutiny was a setback."

President Gloria Macapagal Arroyo acknowledged on Tuesday that Sunday's rebellion in Manila's financial district dealt "a setback in confidence," but insisted that political stability and national security were unimpaired.

"There was no one hurt, no properties were destroyed and the mutineers are back to barracks," presidential spokesman Ignacio Bunye said. "The important thing is our economic fundamentals are on very sound footing."

In trading on Tuesday, the peso fell for the third consecutive session to close at a four-month low against the U.S. dollar at 54.670 pesos. The benchmark Philippine Stock Exchange Index on Tuesday ended down 2.5 percent at 1225.23, its lowest close in a month.

The peso slipped further early on Wednesday, opening at 54.77 against the dollar. Philippine shares were also lower, down 5.19 points, or 0.4 percent, at 1219.82, traders said.

"The peso depreciation, and stocks' decline were just immediate reactions," he said. "Over at the stock market, it wasn't as bad as we expected. In fact, while there was some selling, there were also those who were buying up stocks."

About 300 junior officers stormed a ritzy commercial complex in Manila early Sunday and wired it with explosives to demand the government's resignation. The standoff ended peacefully 19 hours later.

Camacho said it was a relief that the mutiny was short-lived and resolved without bloodshed.

"Over the weekend, everyone was worried and expecting the worst, especially if the mutiny was prolonged," he said.

Camacho said it may take some time before investor confidence returns to the country and that the government would have to increase law and order to draw investors back.

He warned that giving additional fiscal incentives to draw back investors could have a negative impact on the budget deficit.

"We also cannot be careless over our fiscal deficit," he said.

Tighter spending in the first half, combined with improved revenue collection, enabled the government to rein in the budget deficit for the January-June period to 79.58 billion pesos (US$1.45 billion), well below the 102.2 billion peso ($1.86 billion) ceiling for the period.