Poe, Roxas win seen to continue reforms

Liberal Party presidential bet Mar Roxas and Sen. Grace Poe. FILE PHOTOS

A Poe presidency, even without the endorsement of the Aquino administration, is seen to continue the economic reforms started under the daang matuwid (straight path) according to the Washington-based Institute of International Finance (IIF).

A Mar Roxas presidency, which was earlier endorsed by President Benigno Aquino III, would also ensure continuation of reforms.

“Policy continuity will be key to assure a smooth transition to the new administration. Victory by Sen. Grace Poe would likely allow key policymakers to remain in place,” read the “IIF Dispatch: Update from Philippines,” a copy of which was provided by the institute to the Inquirer.

The report was exclusively released by IIF to its members on Sept. 2, or two weeks before Poe’s announcement that she will run for the presidency in next year’s elections.

However, it could be a different story if Vice President Jejomar Binay becomes the President, according to the IIF.

“A win by Roxas would be also positive. If more populist Binay wins, the reform agenda could be under pressure,” the institute said.

On its website, IIF claims to be “the leading global association of financial institutions, with close to 500 members from more than 70 different countries.”

PH more resilient

In the report, IIF Asia-Pacific associate economist Kevin Sanker and director Jean-Charles Sambor said that based on their recent visit to the Philippines, they deemed that the country “might be one of the more resilient Asian countries to the recent turmoil.”

“Yes, the Philippines is quite exposed to China risk; we expect exports to continue to contract. However, key growth drivers are domestically driven. Recent GDP [gross domestic product] readings confirm this trend with growth bouncing back to 5.6 percent year-on-year in the second quarter from 5 percent year-on-year in the first quarter,” the report read.

“We expect growth to remain strong in the second half of the year,” IIF said, even as economic expansion could be “coming short of official projections.” The government targets 7-8 percent growth this year, which the National Economic and Development Authority had said would not be achieved.

Target lowered

Socioeconomic Planning Secretary Arsenio M. Balisacan earlier said that the “realistic” GDP growth for 2015 could be 6-6.5 percent.

Similarly, IIF slightly lowered its 2015 GDP growth forecast for the Philippines to 5.9 percent from 6.1 percent.

In an e-mail to the Inquirer, Sanker explained that the reduction was “due to the downside risks emanating from sustained weak export growth, continued government underspending, possible capital flows volatility following US Fed liftoff and potentially negative impact of election uncertainty on foreign investment.”

In the report, IIF said one of its concerns about the Philippine economy was “whether fiscal spending will accelerate as expected ahead of the elections.”

“Despite a slow start in the first half of the year, we think there should be build up in fiscal spending and disbursement at the agency level,” it said.

“We are more concerned about shortfalls in PPP [public-private partnership] projects in the short term as many foreign investors might stay on the sideline until the elections.”

But as a whole, the IIF expects Philippine markets to “continue to outperform other Asia countries.”

Current account surplus

“The country has a very strong current account surplus, healthy growth in workers’ remittances (likely to stay in the 5-7 percent range after years of double-digit growth), a very competitive BPO [business process outsourcing] sector and limited foreign participation on domestic markets,” it noted.

“Liquidity in domestic local debt markets remains ample and the share of foreign ownership remains less than 6 percent. On the dollar-bond side, there are no signs of fiscal slippage, which could trigger higher-than-expected issuance,” it added.

“While in the past, foreign investors accounted for the bulk of the daily turnover on the equity market, their share has come down recently and the market is now more domestically driven. Technicals are therefore relatively supportive on the equity side.”

As for the Philippine peso, it “should continue to appreciate compared [with] its Asian peers on stronger fundamentals, although we continue to foresee some weakness against the US dollar,” the IIF said.