Risks from change in govt minimal – ANZ

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The transition to a new government next year will pose little risk to the Philippines’ growth momentum, Australia’s ANZ said.

“[W]e argue that the economic fundamentals which led to the country’s increased GDP [gross domestic product]growth and relative stability, especially over the last five years, have been firmly entrenched in the country’s institutions,” the bank said in a research note.

While an improvement in local sentiment has also supported growth in the last five years, the bank said it saw little risk of a reversal after President Benigno Aquino 3rd steps down in June 2016.

“Regardless of who wins the presidential elections in May 2016, we believe the Philippines is well-positioned to maintain its growth momentum and outperform its regional peers, even amid fears of China’s slowdown,” it said.


ANZ said the wheels of economic improvements were already in motion even before the Aquino administration came into power in June 2010.

ANZ based its view on the GDP growth trend, the rise in the business process outsourcing, investment growth and declining government debt.

“The rise in trend growth likely started a decade ago. Although growth has historically been volatile for various reasons, the average growth rates under various presidents since 1986 hovered around 3 percent to 4 percent until around 2005,” it said.

Except for former President Joseph Estrada who was ousted after less than three years in office, each president served long enough to witness a full economic cycle, it said.

It noted that the increase of the average growth rate to 5 percent occurred during the second term of former President Gloria Arroyo in 2004 to 2010.

“In fact, if the global financial crisis had not occurred, we estimate that the average GDP growth would have been 5.7 percent year-on-year,” it said.

The bank noted that the rapid expansion of the BPO industry — which enabled the local economy to rely less on remittances from overseas Filipinos — began as early as 1999 when the first call center was set up in Clark, Pampanga.

“Investment growth has also been increasing for a decade,” it said, noting that over the last five years, the average growth rose to 8.2 percent from 4.4 percent during the last six years of President Arroyo.

ANZ said government debt had been declining since 2004, thanks to record primary budget surpluses during the Arroyo administration.

“As of August 2015, government debt stands at 48.7 percent of GDP, down from 60.8
percent when President Aquino took office. However, we note that the significant decline in public debt occurred during 2004-2010 from a peak of 91.4 percent of GDP,” it said.

With less than a year left to President Aquino’s term, ANZ believes he will likely leave healthy government balance sheets behind.

“The prudent fiscal policies to date will enable whoever is the next elected president to hit the ground running, fueled by a cash-rich treasury,” it said.

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