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Fitch: Weaker Senate opposition to reduce ‘checks and balances’

The reduced opposition in the Senate with the imminent victory of candidates endorsed by President Rodrigo Duterte in the May 13 elections may not be good for the country in the long term, a unit of Fitch Group said Wednesday.

Fitch Solutions Macro Research said in a report that with increased support in the Senate, Duterte’s reforms and fiscal plans would face less obstacles.

“Key reforms include shifting towards a federal system of governance, cutting corporate tax rates and the reinstating of the death penalty. As a result, if Duterte is confirmed to have consolidated power in final results expected to be announced by May 19, we at Fitch Solutions will revise up the ‘policy-making’ sub-component of our short-term political risk index score of 63.1 out of 100 for the Philippines,” Fitch Solutions said.

“However, reduced opposition within the Senate lowers the potential for ‘checks and balances’ on Duterte’s administration and may over time see a decline in our Long-Term Political Risk Index score of 65.4 out of 100 for the country,” it said.

“The strong show of support for Duterte will both give him the confidence and ability to push ahead with his reform program. The Senate has proved a sticking point for Duterte, as seen by the delay to the passing of the 2019 budget,” Fitch said.

The budget impasse between the two houses of Congress resulted in a slowdown in economic growth in the first quarter to a four-year low of 5.6 percent from 6.5 percent recorded a year ago. It was also slower than 6.3 percent in the fourth quarter of 2018.

“We would expect Duterte to begin work to push through his reforms, most significantly support for his federal governance plans, which would need the backing of both houses and voters. Duterte will also face increased domestic pressure over his relations with China, with the majority of Philippine voters distrusting of growing Chinese influence,” Fitch said.

“Moreover, in May the Philippine Supreme Court ordered the government to protect the country’s interests in the South China Sea, and increased Chinese activities around the disputed islands will force Duterte to take a tougher stance with Beijing, potentially forgoing some investment,” it said.

Fitch Solutions said this, along with slowing economic growth, would “provide challenges for Duterte over the final half of his term as he looks to secure his legacy via an appointed successor.”

Topics: Rodrigo Duterte , Fitch Group , Fitch Solutions Macro Research , Supreme Court
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