BANKING giant HSBC sees the May 9 national elections posing little risk to the Philippines’ economic outlook over the course of the year even as it noted that investors have expressed a preference for continuity.
“There is little short-term impact from the elections, but the investment community has expressed a preference for continuity,” it said in a research note focusing on the presidential candidates’ economic platforms.
“As we wrote in the past and summarize again below, the campaign pledges are relatively similar despite the spirited debates. This is a positive legacy from the Aquino era (who also built on the fiscal consolidation path started by former President Gloria Arroyo). There is a palpable sense that certain policies, like the focus on infrastructure and improved fiscal efficiency, have benefited the country and the electorate,” it said.
The bank said Senator Grace Poe and Mar Roxas are generally perceived to be the “continuity candidates.”
“Roxas is the candidate of Aquino’s Liberal Party and his chosen successor, while Senator Poe, though independent, is allied with Aquino in the Senate and will likely keep many current cabinet members in their positions,” it said.
However, the split between the “continuity candidates” and the rest is not so straightforward, it pointed out.
For instance, HSBC said Roxas deviates from the Aquino administration on key policies, citing concerns over constitutional reforms to attract FDI, and has opposed moves to join the Trans-Pacific Partnership.
Incidentally, these are measures that both Mayor Rodrigo Duterte of Davao City and Vice President Binay seem to support, HSBC noted.
“However, from a policy perspective, the latter two are most likely to reshuffle the cabinet given their different political affiliations, which suggests a degree of uncertainty,” it said.
Encouragingly, most candidates plan to take the pro-growth agenda further by improving the Philippines’ competitiveness with regard to foreign direct investments (FDI) through constitutional changes, it noted.
Over the short term, the bank said private consumption should remain robust as latest data showed remittance tracking an annual 10 percent growth in peso terms.
Meanwhile, campaign spending by the various candidates in the presidential, legislative, and regional seats has likely boosted demand for local services and the government has largely met its ambitious goals to front-load infrastructure disbursement in the first quarter, it said.
Moreover, HSBC said high-frequency indicators such as credit growth and trade data all point to an increase in momentum in the first quarter of 2016.
“Still, the agricultural sector–which accounts for roughly 10 percent of GDP–remains a drag due to persistent drought that has led to crop failure,” it said, but noted that this should be easily offset by momentum elsewhere.
HSBC is seeing a GDP expansion of 5.9 percent in 2016, an improvement from the 5.8 percent growth in 2015.
“Over a longer-term horizon the election impact is more relevant. As long as candidates stick to the policy platforms and infrastructure spending continues, the outlook should remain positive,” it said.