PHL growth to depend on new president’s economic policies – IHS

By , on May 11, 2016

IHS Global Insight logo
IHS Global Insight logo

MANILA – IHS Global Insight, a United States-based think tank, said medium-term outlook for the Philippines will depend on the economic policies of its new administration.

Partial and unofficial tally for the 2016 national elections showed that Davao City Mayor Rodrigo Duterte is leading the presidential race.

IHS Asia Pacific Chief Economist Rajiv Biswas said Duterte’s election platform lacked content on economic policies which creates uncertainty about his future economic reform agenda.

“International investors and fund managers are likely to initially respond by reducing their exposure to Philippines equities and local government debt, which could push the Philippines peso further down against the US dollar in coming days,” added Biswas.

The Philippine peso and stock market index have already fallen since mid-April as the 2016 election polls indicate strong lead for Duterte.

“The medium-term outlook for the Philippines economy will depend on the new economic policies of the incoming Duterte administration. If he appoints a strong economic frontbench with well-respected economists with a strong track record, this could reassure investors and restore confidence in the medium-term outlook for the Philippines economy,” the IHS economist stressed.

“However, if the Duterte administration does not maintain fiscal discipline and has weak commitment to further economic liberalization and fails to improve the business climate for foreign investment, this will undermine the medium-term growth prospects for the Philippines economy,” Biswas noted.

However, the economist mentioned that business process outsourcing (BPO) sector and overseas Filipinos’ remittances will still fuel the Philippine economy.

BPO revenues for this year is expected to reach USD25 billion with additional 225,000 jobs while remittances reached USD25.8 billion in 2015 or accounting for 9.8 percent of the country’s gross domestic product (GDP).

“Two key growth engines for the Philippines economy during President Aquino’s term of office have been the fast-growing IT-BPO industry as well as the large inflows of remittances from workers abroad,” said Biswas.

He also mentioned that the Philippines saw GDP growth averaging around 6 percent from 2011 to 2015.

However, Biswas noted that despite the economic progress during the current administration, high level of poverty still persists in the Philippines.

“If the incoming President and the new Philippines government administration can continue to pursue economic reforms and strengthen institutional governance, then GDP growth of around 6 percent per year can be sustained over 2016-2020,” the economist said.

“Ensuring that the benefits of rapid economic growth do reach a wider share of the population will be a crucial policy priority for the next administration, and key strategies to reduce poverty will be to accelerate foreign investment inflows into manufacturing and infrastructure development,” he stressed.

“The next administration will also need to ensure that trade and investment liberalization are high priorities on its policy agenda, through bilateral and regional trade and investment initiatives with key partners such as the ASEAN+3 nations as well as the EU, the US and India,” Biswas added.