Davao City mayor Rodrigo Duterte’s victory is not expected to have an immediate impact on the country’s sovereign rating as the Philippines still continues to reap the harvest of the outgoing Aquino Administration, Fitch Ratings said on Monday.
“The victory of Rodrigo Duterte in the Philippines presidential election has no immediate impact on the country’s sovereign rating or outlook,” Fitch Ratings said.
“Our affirmation of the Philippines ‘BBB-’/Positive sovereign rating on 8 April reflected economic growth and fiscal and external finances and improved governance under President Benigno Aquino. We forecast real GDP growth of 5.9 percent this year, close to the 2010-2015 average of 6.2 percent and well above the ‘BBB’ category median of 2.6 percent,” Fitch said.
Senior equity analyst Alexander Tiu explained that since Duterte is not yet officially seated as president his impact is not expected to be felt just yet. He said it might take more or less 6 months before the new Administration might have an effect on sovereign ratings.
“I think the economy will still be at a status quo for 6 months or until Duterte gets the hang of things,” Tiu told The Manila Times in a text message response.
“The economy also remains strong without government intervention,” Tiu added.
Lexter Azurin, head of research at UniCapital Securities said the changes in economic policies would not be felt for up to two years.
“It might take a year or two to feel the effects of changes in business policies if ever,” Azurin said.
Duterte, who garnered almost 40 percent of the votes based on the unofficial tally, was not very keen on discussing economic strategies during his campaign. He admitted he is not as adept in economic policies and economic affairs.
Duterete is known for his crime busting tactics implemented in Davao City. His platforms as mayor did not feature detailed economic plans but instead highlighted crime busting and promoting social justice.
With his lack of economic expertise, Duterte said he would adopt his opponents’ Roxas’ and Poe’s economic plans and promised to continue the economic reforms implemented by the Aquino administration.
Tiu said Duterte’s appointees in the economic cabinet would be crucial.
“What is important is his economic team and policies. And how he can sustain the current administration’s policies,” Tiu said.
Fitch said strong fundamentals would continue to support growth if current macroeconomic policy settings are broadly maintained. “China’s slowdown has caused the Philippines’ net exports to drop, but remittance flows have supported private consumption, as well as helping maintain a current account surplus. At close to 18 percent of GDP, the Philippines’ estimated net external creditor position for 2016 contrasts with the ‘BBB’ median’s net debtor position of 5.7 percent of GDP,” the ratings agency explained.
“As we noted in our April affirmation, continued strong growth without the emergence of imbalances—such as widening fiscal deficits—would be credit positive, as would evidence that the improvement in governance standards administration can be sustained following a change in government,” it added.
Governance standards and competitiveness indicators as measured by international organizations showed steady improvement during the Aquino Administration. Global competitiveness, as ranked by the World Economic Forum, increased, and indicators for corruption, transparency and economic freedom also improved substantially.