Despite strenuous efforts by opponents of President Rodrigo Duterte to make the case that the Philippine economy is suffering under his leadership, economic indicators point in a very different direction. They show that both growth prospects and confidence remain high – actually they’re bullish.
This will likely dishearten the anti-Duterte coalition – the quilt of local opposition groupings largely led by the Liberal Party, international and domestic opposition media, human-rights and civil-liberties groups, and elements of foreign governments, such as the European Union (EU), and multilateral organisations, such as the United Nations.
While they continue their attempts to bring Duterte to heel, their economic argument – in essence that Duterte is bad for the Philippine economy – continues to fail.
Last week, the Makati Business Club (MBC) put out the following statement following a survey of its members. “On investments for 2017, the projection remains bright. A positive outlook remains in terms of corporate performance for 2017, with a large majority of the respondents projecting an increase in both gross revenues and net income in the coming year”.
It added that around 74% of firms approached would be making additional investments in the coming year. The average value of those investments was put at PHP785 million. And 51% or respondents said they would be increasing the size of their workforces.
No one would accuse the MBC of being a staunch Duterte supporter. Actually, far from it. Most of this demographic – it represents the Philippine corporate elite – would more likely have voted for Liberal Party candidate, Mar Roxas, or Independent, Grace Poe, at the last election.
In fact, during the presidential campaign – less than a week before the country went to the polls – Duterte, by then the front runner, was invited to an MBC forum to provide insights into his economic policies and his strategy for doing business. It was to many members’ minds a lacklustre performance and they marked his report card accordingly. “It lacked substance,” they said. Certainly, it would have done little to win him wide support among senior executives.
Be that as it may, on Wednesday Fitch Ratings maintained its “investment-grade” ‘BBB-‘ rating with a positive outlook for the Philippines. And this is due to the sustained economic-growth performance under the Duterte-led administration.
Fitch pointed out that Real GDP (gross domestic product) grew by 6.8% in 2016 – up from 5.9% in 2015 – supported by continued strong growth in private consumption spending and investment. The ratings agency expects the economy to sustain its strong growth momentum, with GDP forecast to increase by 6.8% and 6.7% in 2017 and 2018, respectively. “The rating Outlook is Positive. Hence Fitch does not anticipate a material probability of negative action over the forecast period,” the agency said in its report.
Earlier this month, the International Monetary Fund (IMF) also projected that GDP growth for the Philippines this year will remain strong at 6.8%, adding that this would allow the economy to remain resilient even in the event of external turbulence. Bangko Sentral ng Pilipinas (BSP), the central bank, meanwhile, believes GDP will top 7%. In the third quarter of 2016 it had hit 7.1%, marking the fastest growth rate in Asia.
Meanwhile, in the MBC survey, 83% of those polled expected GDP to grow by 6.8% or above this year.
Fitch added: “Sustained strong performance of the business process outsourcing (BPO) sector also remained supportive of employment and domestic demand”.
Let’s stop there for a moment. This analysis flies in the face of repeated reports put out by the American Chamber of Commerce of the Philippines which paints a very dark future for the Philippine BPO industry – an industry which earned US$23 billion last year and which has forecasted earning of US$39 billion by the end of Duterte’s term in 2022.
Last September, the Chamber – specifically referring to the country’s BPO sector – released this statement. ‘The American Chamber of Commerce of the Philippines voices growing concern over developments that could harm the long-standing optimism of American business to invest in the Philippines’ … [because] Duterte’s War on Drugs and the death toll associated with it was damaging the country’s image”.
Again in January the Chamber told Forbes magazine the “issue of extrajudicial killings and the drug war is alarming and could possibly harm the optimism of American business to invest in the country”. Forbes comically suggested that the cancellation of a concert in Manila last December by American singer James Taylor, “might set a trend”. Apparently he was making a “political stand” against the death toll from the drugs war, according to the magazine
Clearly, none of that has materialised and shows the Chamber to be little more than an ineffective anti-Duterte lobby group. No doubt it will continue its campaign but it’s going to need far better data than the anecdotal and un-named sources it’s used previously if it’s going to stand up to the hard data and analysis produced by Fitch, the IMF and the BSP, and the MBC’s outlook-sentiment rating.
Of course, given the amount of adverse media coverage and critical political rhetoric which Duterte’s War on Drugs has attracted over the past nearly nine months, Fitch felt it was necessary to include some reference to it in its report.
Noting that the Duterte administration has adopted a 10-point socio-economic plan, which “signals broad continuity of policies under the previous administration” – a promise Duterte made during his campaign – Fitch added: “Macroeconomic performance has remained strong despite the increase in incidents of violence associated with the administration’s campaign against the illegal drug trade while domestic political stability has been maintained”.
This is a very different appraisal to the one we’re used to hearing – that the War on Drugs is scaring away investors and crippling the economy.
Furthermore, while the European Parliament may have its problems with Duterte – last week it issued a resolution condemning “many extrajudicial killings” in the Philippines and urged Duterte not to reintroduce the death penalty – EU member countries generally don’t; or at least if they do they don’t express them.
Just this week, that discrepancy was brought into sharp focus when Hungarian Foreign and Trade Minister, Peter Szijjarto, met with Duterte in Davao City. His message was loud and clear: Hungary, an EU state, will not be meddling in the internal affairs of the Philippines – irrespective of the EU’s stance.
Hungary doesn’t comment on the internal and domestic issues of other countries, he said. “We understand that it’s only the Filipino people who have the right to make a decision about (their) country”.
How refreshing to hear an independent European view of the Philippines’ sovereign rights. But it’s more than that; it’s yet another endorsement of the Philippine economy under Duterte. Szijjarto, the first ministerial-level official from Europe to visit the Philippines since Duterte was elected, is keen on strengthening cultural and trade relations between the two countries.
It’s also worth noting that while the European Parliament pursues Duterte like a Rottweiler with the scent of blood in its nostrils, it’s more restrained when it comes to criticising its major trading partners – like Mexico, for example. In the past 10 years at least 100,000 people have been killed as a result of drug violence in Mexico – but not a whisper from the European Parliament.
The point is, investors need to gain a balanced view of what the real situation on the ground is – and that’s nothing like the accounts that have been put out in the name of journalism in the Western media and some parts of the domestic press. To call it exaggeration would be a massive understatement.
All in all then, the Philippine economy is doing very well and its prospects look bright. No one’s discounting the problems which confront the current administration – the drive to eradicate the illegal drug industry being a major one. But it hasn’t stopped the Philippines having the highest growth rate in Asia; in hasn’t stopped inward investment flows – in fact they’ve been rising – it hasn’t dampened the spirit of local corporations to invest and expand and its hasn’t deterred foreign partners from seeking closer trade ties.