The country sits in a precarious position, caught at the fulcrum of political disruptions. Pressures are mounting from both external and internal fronts, aggravated by the unpleasant and disturbing episode at the Senate on Wednesday night.

The standoff, the gunfire, and the impending impeachment trial of Vice President Sara Duterte have further mired the country’s already wobbly political landscape.

This highly fragmented and unstable environment—characterized by shifting alliances, as seen in the changing of the guard at the Senate on Monday—directly threatens the country’s frail economic performance.

Experts believe we are treading an era of geo-economic confrontation and structural transition. This was highlighted in the latest World Economic Forum Global Risks Report as a leading risk, with economies “increasingly resorting to economic and technological coercion, moving away from cooperative frameworks and into transactional dealmaking.”

From a Philippine perspective, the current tense climate shows that the government—both the executive and the legislative—is deeply preoccupied with high-profile political issues amid deepening economic turmoil.

The Wednesday incident has heightened risk aversion. It underscores the apparent conflict between executive, legislative, and potentially international institutions, which investors view with a wary eye.

Generally, investors abhor uncertainty, especially the political kind. These developments do not bode well for the administration’s aspirations to attract foreign investment, which is already on a downward trajectory; foreign direct investment (FDI) slid to $1.03 billion in February.

While it is too early to measure the exact market impact of these political developments, it is natural to expect immediate short-term volatility in the financial markets. This could lead to temporary selling pressure in equities and continued volatility in the spot currency market.

As I write this, the peso opened at ₱61.35, a skimpy three-centavo appreciation from Wednesday’s close of ₱61.38. Some traders attributed this to tight guarding by monetary authorities.

My certified financial guru, Jonas Ravelas, expects the local currency to trade within a range of ₱61.30 to ₱61.90. Meanwhile, several currency traders believe the peso could breach the ₱62 mark, depending on the actions of monetary authorities.

The assumption is that the Bangko Sentral ng Pilipinas may hold a policy meeting ahead of its May 21 schedule to raise the key interest rate in order to quash speculative attacks on the peso.

Peso volatility is expected to prevail. Heightened instability could trigger further fluctuations against the United States (US) dollar, especially if foreign investors perceive a genuine crisis in governance.   From my end, I believe the market reaction will likely depend on how quickly authorities can restore a sense of calm and clarity to this tenuous political situation.