‘Outperformance ahead… despite some Duterte uncertainty’

INVESTORS could draw confidence from the new government’s stable economic policies “despite some Duterte uncertainty,” Fitch Group’s BMI Research said in a September report released yesterday, referring to President Rodrigo R. Duterte who has courted controversy for his bloody war on the illegal drug trade and insults at the Pope and US President Barack H. Obama as well as the United Nations and, just last Tuesday, the European Union.

In its report, titled: “Philippines: outperformance ahead,” BMI Research said sound fiscal plans put the country on track to hitting 6.9% gross domestic product (GDP) growth this year,

against the government’s own 6-7% target range for 2016 and 5.90% pace actually achieved last year.

That will place the Philippines next only to India, which is expected to grow 7.20%, and ahead of China’s projected 6.30% in a list of 20 Asia-Pacific economies tracked by BMI Research.

“Despite his more abrasive rhetoric, Duterte is proving to be an economic pragmatist so far,” analysts at BMI Research said in the report.

“Strong fiscal spending plans, as well as investment liberalization efforts, could boost the Philippines’ structural growth rate.”

At the same time, BMI Research said: “Duterte’s crackdown on drug- related crime raises questions about the rule of law, and risks undermining positive investor sentiment in the near term.”

Still, there are “early signs” that stronger fiscal spending could stimulate further economic expansion, especially when coupled with strong manufacturing and services sectors and a young, educated labor force, the report read.

The higher budget deficit cap set by Mr. Duterte’s economic managers at 3% of GDP is likely to fuel further growth, assuming “high-quality spending.”

“A stronger spending program could have a positive structural impact as long as the government allocates the funds to productive areas — such as infrastructure, agriculture and education — that will help to lift productivity across the economy,” BMI Research said.

Mr. Duterte and his economic managers have vowed to spend aggressively on infrastructure and social services in a bid to make sure economic growth lifts more Filipinos out of poverty.

Budget Secretary Benjamin E. Diokno said the government is poised to spend P7 trillion for infrastructure projects from 2017 to 2022, and hike its share to 7% of GDP. The draft P3.35-trillion national budget for 2017 that was submitted to Congress last month will see funding for public infrastructure increase 13.79% to P860.7 billion, equivalent to 5.40% of GDP, in 2017 from P756.4 billion, or 5.10% of GDP, this year. —