Government Investment News Analysis

Philippines in bull territory

Bullish Philippine Economy

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.

75 Comments

  • IMF and ADB, Sept. 28, 2016: Multilateral lenders International Monetary Fund (IMF) and Asian Development Bank (ADB) both raised their economic growth forecasts for the Philippines this year and next, citing the country’s IMPROVED FUNDAMENTALS and RESILIENCY TO EXTERNAL HEADWINDS. QUESTION for Volatilian: Who laid the groundwork to improve economic fundamentals to be resilient to external headwinds? http://www.philstar.com/business/2016/09/28/1627982/6-6.4-year-imf-adb-hike-philippine-growth-forecasts

    • “The Philippine economy has performed well in recent years with rising potential growth and strong macro fundamentals. Economic growth is supported by robust domestic demand and is broadly in line with potential while the outlook for inflation is well within the target band,” IMF said.

    • However, the Washington-based multilateral lender noted underemployment and poverty rates have remained stubbornly high despite the sustained economic expansion.

      “The strong economic performance, however, has not yet fully benefited a wide range of the population. Poverty and inequality remain high. Poor infrastructure has constrained private investment and job creation. Public investment has risen but continues to be low due to weak implementation capacity, while progress has been made on fiscal transparency,” it said.

    • So if it’s a good thing, we owe it to the past administration, but if it’s a bad thing we blame it on the present? What is pointed out here is for the naysayers to stop the maligning and let this government push forward. We are in the same boat here. We sink, you sink. We float, we all sail nicely😀

    • I think the ground work has been laid by PFEMarcos but has to wait for someone honest, with deep affection for the Filipino people, someone with strong political will then as if magic, the orchestra starts to play !

    • Pag good kay pinoy,pag bad kay digong? Ayos yan,tanong ko rin but not about economics ito ha,who laid the ground work for china’s siezing spratly islands,just saying….be fair ika nga ni mam Bing Alvarez Cacnio Maria we are on the same boat,just paddle forward,tayo lahat makinabang

    • Loaded question ba to? Though the economy started moving under PNoys term, he simply rode out what was initiated before him. The economy was actually somewhat stunted due to his “underspending.” It was actually PGMA who laid out the foundation for our economy to grow. She placed us on the runway for a take off which we are about to do.

    • Alma Fe Garcia Javelosa, in fairness to the marcoses, they started laying out the infrastructure for economic development. Road and bridges were constructed, agriculture was at its peak with the green revolution. In fact, we started exporting rice with the masagana 99 rice program. We were on our way to energy self sufficiency. Back then, we were number 2 in geothermal development.

      What went wrong? The mexican financial crisis caused most developing economies to go on a tail spin. He was almost able to rein in the situation but EDSA 1 cut his term short and cory’s notion that everything marcos is evil and just threw all of his programs out rather than build on them

    • That’s why figures for 2016 is not that accurate. Why? It was shared by two administrations, two presidents. The real measure is our performance for 2017. Yes, the previous admin may lay the groundwork, but if the current admin won’t capitalise on in, all of us are at the losing end. Same goes with PNoy’s admin, how sure are you that PGMA didn’t lay down the groundwork for what seems to be a prosperous economy.

      That’s the problem we are facing, especially with economics. It doesn’t happen overnight. Most of the time, it will be the next administration that will benefit or suffer. Not to mention ever fluctuating global markets that we are susceptible to.

      Yes, the current admin is spending a lot when it comes to infra, but can the gains will be immediately be felt? No. The admin still need to prove to prospect investors that those infra projects will work for them. And when a prospect investor decided to that invest, it will take months or even years to complete their investment and render it operational.

      On the flip side, it is possible that the previous admin is doing a not so good job that luckily, the current admin was able to reverse it.

      Again, 2016 is not that accurate. It is better to compare the years in the middle of the administration like 2011 vs 2012 vs 2013 vs 2014 vs 2015. And 2017 vs 2018 vs 2019 vs 2020 vs 2021. Not the begin Nor towards the end, simply because it was and will be shared by two administration. Let’s wait for 2018 to be end before we can come up with concrete numbers, If the current president is doing well or not.

      And from what I know, GDP is adjusted quarterly. It can go up or down or stay the same.

      When it comes to ForEx, PH Peso vs US Dollars. A lot of factors are involved. Primarily the US Federal Reserve rates. The number of PH peso circulating in our country vs the US Dollars. Our gold reserves to represent the value of our money.

      But don’t take my word for it, am no economist. 😂😂😂

  • The numbers speak for itself. And to quote: “it’s the economy, stupid! ” same words from the west, if I may. Kudos! The Volatilian exists for the truth. Mabuhay po kayo.

  • I truly believe that Filipinos have qualities, learnings, experiences and capabilities that are difficult to ignore by businessmen worldwide. We must take pride. Let us go on building rather than destroying. Doing good is always the best choice.

  • Yeah, all those facts prove these holy than thou pundits wrong and put to shame. Forecasts on things do not represent the truth on the matter, and could never be considered as wisdom. They failed most of the time because it is only an assumption of what has never been proven yet. They are merely motivated shout outs for attention of naysayers and doomsayers, especially in the case of debunking the DU30 administration and its economic agenda to grow.

  • Fitch,the best and most reliable Wall Streets rating agency is bullish over the Philippines bc of its strong economic growth and low debt level compared to other countries with similar conditions. Add to this the mega infrastructure projects currently build and in the pipeline and u will see a “Wirtschaftswunder ” in Asia. Like Ramon S. Ang said,”this country will fly”!

  • Jojo Limosnero, Volatilian touted the achievements kuno of Duterte. Were IMF’s and ADB’s forecast wrong? Your thoughts reflect that you are not a substantial investor in any company in the stock market nor have managed a sizable business of your own.

  • Well you have to see it relatively. A GDP growth rate of 6.8% which is amongst the highest in Asia however stands against a population growth rate of 10%. What is the result? You tell me

    • When I arrived in Zamboanga six yours ago the official population of the Philippines was 60 million. Now it is in excess of 100 million and it will double in the next 5 to 6 years consuming more and more agricultural space an rice fields. The unofficial population already stands at 150 million due to many unregistered children. Well Mr. Antonio Santos, I do not know where you have the 2% grows rate from.

    • When I arrived in Zamboanga six yours ago the official population of the Philippines was 60 million. Now it is in excess of 100 million and it will double in the next 5 to 6 years consuming more and more agricultural space an rice fields. The unofficial population already stands at 150 million due to many unregistered children. Well Mr. Antonio Santos, I do not know where you have the 2% grows rate from.

    • When I arrived in Zamboanga six yours ago the official population of the Philippines was 60 million. Now it is in excess of 100 million and it will double in the next 5 to 6 years consuming more and more agricultural space an rice fields. The unofficial population already stands at 150 million due to many unregistered children. Well Mr. Antonio Santos, I do not know where you have the 2% grows rate from.

  • LPs at mga corrupt officials, druglords, drug pushers, corrupt medias please help our country to improve! Don’t wait for a new people’s revolution to explode! It will be a bloody one this time and You – are the first casualty if it happens! Just remember the Spring Revolution in the Middle East!

  • Don’t put the blame on our leaderships. PH don’t have the capacity to influence. The old doctrine continue, “The strong must eat the weak, for they are strong!” Bargaining is the name of the game.

  • Our econ0my could leap highly if n0y2 didnt underspend 4 the past 5 years & only on his 6th year the econ0my starts to m0ve 4ward bec he start spending 4 projects where his allies would benefit fr0m as the election is forthc0ming, in short its n0t n0y2 who laid down our econ0my’s gain but its GMA, n0t NOYNOY, & n0w g0od thing duterte made to reign & obviously this will m0ve 4ward just please LP stop ur intention 2 bring the country down.

  • Eh bugok lahat cila mga conspirator para maghirap bansa at nagpalala sa droga,ngaun c binabaligtad c Pangulo ang masama ang iitim ng buto nito at itong bugok na abscbn ingat po tayo at boykot mga balita nito iba po ang layun yung magaganda wala at negatibo alam ibalita tulad ni alejanu ilang araw na pinakikita impeachment nito para manariwa at ayaw matabunan pag may bago na ulit negatibo bivitawan ba at ibabalita yung bago o kaya mag hanap cila,sa mga talumpati ng pangulo tulad nung pardon pinasama na naman nila c Pangulo at kung anu anu speculation santong kabayan noly boy masyadao binugbog c Pangulo

  • Kung yun nga bakit nangutang ng pagkalaki laki eh maganda naman ang ekonomiya… weehhhh sabi ng isang kakilala ko na frequent traveller dati bago cxa pupunta ng maynila nagpapa reserve cxa sa hotel a week before his arrival. Ngayon no need na dahil daming available. Anong nangyari sa turismo?

  • Bloomberg said Pres. Duterte talked the peso to its lowest in the last 10 years. Fuel prices have gone up because of this and the domino effect on commodities is already felt in the market. It is reported that inflation rate has gone up. There is increase in unemployment rate which gov’t apologists lamely reasoned as due to resignations from jobs. ARE THESE THE INDICATORS OF A ROBUST ECONOMY?

  • Puro matatalino mahuhusay kung magaling kayo tumulong kayo sa pag unlad ng bansa natin mga taong hinahangaan ko eh mga OFW’s dugo at pawis ang puunan nila pero malaki ang naitutulong sa bansa kayo ba my naitulong sa bansa natin o bka magaling lng kayo magsalita awa ng Diyos malaki ang naitulong ko sa bansa natin 38 yrs. akong OFW pero wala akong napakinabangan sa OWWA na yan kasi puro magnanakaw dn ang mga namamahala niyan ano ba ang naitulong ng animal na yan saken wala maige pa ang SSS nakatulong saken pero pera ko un na ibinalik lng saken nasa dugo ng pilipino ang ka walan ng disiplina at pasaway khit sino pang pangulo ang ilagay natin kung tayo mismo mga walang disiplina malabo umasenso ang bayan natin nasa lahi natin ang uto uto kung ano yung masama eh ginagawa hindi marunong rumespeto sa kapwa puno ng kahambugan at kayabangan yan tayong mga pilipino

  • SI PANGULONG RODRIGO DUTERTE ANG ITINALAGA NG DIYOS NA MAMUNO SA PILIPINAS.

    ROMA 13

    TUNGKULIN SA MGA PINUNO NG BAYAN

    13 Ang bawat tao’y pasakop sa mga pinuno ng pamahalaan. Sapagkat walang pamahalaang hindi mula sa Diyos at ang mga pamahalaang umiiral ay itinalaga ng Diyos. Kaya nga, ang lumalaban sa pamahalaan ay lumalaban sa mga itinakda ng Diyos; at lalapatan ng parusa ang sinumang lumalaban. Ang mga pinuno ay dapat katakutan ng gumagawa ng masama ngunit walang dapat ikatakot sa kanila ang gumagawa ng mabuti. Ibig mo bang huwag matakot sa mga namumuno? Gumawa ka ng mabuti at papupurihan ka nila. Sila’y mga lingkod ng Diyos sa ikabubuti mo. Ngunit matakot ka kung gumagawa ka ng masama, sapagkat sila’y talagang may kapangyarihang magparusa. Sila’y mga lingkod ng Diyos at magpaparusa sa mga gumagawa ng masama. Kaya nga, dapat kayong pasakop hindi lamang upang maiwasan ang poot ng Diyos kundi dahil sa iyon ang matuwid.,

  • PRESIDENT RODRIGO DUTERTE IS THE AUTHORITY ESTABLISHED BY GOD FOR THE PHILIPPINES!

    ROMANS 13

    Submission to Governing Authorities

    13 Let everyone be subject to governing authorities, for there is no authority except that which God has established. The authorities that exist have been established by God. Consequently, whoever rebels against the authority is rebelling against what God has instituted, and those who do so will bring judgement on themselves. For rulers hold no terror for those who do right, but for those who do wrong. Do you want to be free from fear of the one in authority? Then do what is right and you will be commended. For the one in authority is God’s servant for your good. But if you do wrong, be afraid, for rulers do not bear the sword for no reason. They are God’s servants, agents of wrath to bring punishment on the wrongdoer. Therefore it is necessary to submit to the authorities, not only because of possible punishment but also as a matter of conscience.

  • because of 3decades that pilipinos egnor the abuse and corruptions they think that we the people of philippines they think we are egnorant,we have endure the sufferings to avoid problems while waiting for someone to lead and express our griefs and sufferrings,and now is the time,for those who wants to destroy these administrations will face the wreath of the people itself,because we need change and most of all a true government that can bring back those people who suffered humilliations from being slaves known as ofw.

  • Its.Noynoy who worked to bolster our economy which the current administration is reaping. He wont be one of Asia’s most admired leaders in the recent years for no reason. Obviously you admitted that the economy was leaping under Pnoy’s time which you said was because of Gloria. Then why duterte have to loan at a very high interest. The LP isnt bringing the country down, the administration and duterte himself did. The country was in the international stage because of his admins killing spree of accused but not yet proven guilty of drug crimes impoverished Filipinos. Why blame LP? If Pnoy messed during his administration at least the economy was soaring then. Tourism was booming. You blame drugs? What about now, are we drug free? No. Is tourism still.booming? No. Is the economy stable? No. Are people safer than before? No.