• Poe likely to sustain reforms–think tank

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    Sen. Grace Poe has the highest possibility of sustaining the Aquino administration’s economic reforms while Davao City Mayor Rodrigo Duterte will expose the economy to various risk scenarios, according to a Fitch-owned think tank.

    “After some potential near-term volatility, Poe poses the least risk of policy discontinuity,” BMI Research said in a report.

    This bodes well for the expanding renewables sector, which has benefited from the implementation of attractive regulations over the past couple of years and a pick-up in investor interest as a result, it noted.

    “A Grace Poe victory would be a positive for the country’s power and renewables sector, as it would result in greater infrastructure spending, a more conducive business environment for private investment and longer-term policy continuation,” the report said.

    BMI noted that Poe has voiced strong support for the infrastructure sector — aiming to take government infrastructure spending to seven percent of the country’s gross domestic product from about five percent at present.

    It believes that the power industry will be a key beneficiary of this increased spending because of a desperate need to improve power supply in the Philippines.

    The think tank said the country remains severely exposed to power supply shortages, which hamper social and economic development.

    Growth in power capacity has not kept pace with growing electricity demand, BMI reported, resulting in a narrow supply/demand margin that triggers outages when existing capacity drops unexpectedly.

    It expects power consumption to remain robust in the coming years, with annual average growth in consumption of five percent between 2016 and 2025.

    “In light of this growing demand, we believe channeling investment into the power sector will be a top priority of a Poe government’s infrastructure spending plans,” BMI said.

    The think tank pointed out that Poe is the more investor-friendly candidate compared to Duterte, having expressed support to revise economic provisions of the Constitution.

    “If traction is gained on this reform under Poe, there would be increased scope for Independent Power Producers (IPPs) to enter the Philippine power market,” BMI said.

    In relation to this, the think tank said Poe has also expressed strong support for continuation of the Public-Private Partnership (PPP) program, which has gained momentum under President Benigno Aquino 3rd.

    It noted that there could be a degree of investor uncertainty regarding the PPP program in the run-up to the elections and in the immediate aftermath as planned and ongoing development projects have the potential to be reviewed.

    Wary of Duterte
    The BMI, meanwhile, said Duterte’s victory will be less beneficial as there would be a greater risk of policy instability, “in light of the shifting government priorities under a Duterte administration.”

    It pointed out that the power and renewables sector will benefit less from his presidency since Duterte will focus on preventing crime and corruption instead of infrastructure development.

    “For example, Duterte’s highest priority is tackling crime and corruption in the country–an area in which he has previously registered significant success; however, he has stated that he would not focus on big infrastructure projects over the near-term,” the think tank said.

    It expressed uncertainty on Duterte’s economic platform.

    “Duterte’s economic platform is still largely unknown and he intends to delegate the task of economic policy-making–something that adds further uncertainty to the policy environment if he were to win the elections,” it added.

    Nevertheless, the group said one potential pillar of Duterte’s economic platform could be strengthening the industrial sector.

    “This would be a risky strategy with potentially limited rewards amid current global steel oversupply conditions, but would necessitate an expansion of the country’s power sector in order to achieve stable output to power industrial activities,” it added.

    Earlier, the think tank raised concerns regarding the future of the government’s fiscal accounts particularly if Duterte wins.

    It also expressed concern over a possible increase in spending on security and defense by a Duterte government, which it said could weigh on the fiscal position and add fuel to tensions between the Philippines and China.

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    4 Comments

    1. So says the foreign-wned think tank. Since it is foreign, it has no credibility here. Foreigners have their own interest and it is not the Philippines’!

    2. Ms. MAYVELIN U. CARABALLO, which Think Tank you are referring to?

      As far as I know, Foreign Investors are worried about Duterte and Poe winning the elections. I believe this is only normal because none of them have directly made any contribution to the economy. Being a stock trader myself, I look at historical performances of stocks or companies and not just on their potential to grow.

      In case you are not aware this report, let me share it to you. http://www.philstar.com/business/2016/04/30/1578097/election-jitters-continue-dampen-stocks

      Now, if you want to know exactly why Investors prefer Mar Roxas over Grace Poe and Duterte, please read further… https://web.facebook.com/joms.adajar/posts/10153525487155205

      • The problem is Mar will not win this election. Mar has a problem of getting the work done on time. He has the same problem with Pnoy. Most of the projects are still in progress after 6 years as president and Mar after 4 1/2 years in service. Both of them are not corrupt but both of them are poor managers.

      • Joe Thirsty on

        The think-tank she’s referring to is the BMI Research – part of Fitch Group which has established itself as a leading financial information services.