Credit rating agency Fitch Ratings said Thursday the expected victory of the senatorial candidates allied with President Rodrigo Duterte will ensure the continuity in the next three years of the policies and reforms instituted by his administration.
“The early results of the mid-term elections suggest President Duterte and his allies would secure a majority in the Senate,” Sagarika Chandra, associate director in Fitch Ratings’ Sovereigns team, said on the initial results of the 2019 general elections in the Philippines.
“This outcome, if confirmed, could bode well for policy continuity during the President’s remaining term.”
Chandra said the key economic factors they would be watching in the period ahead included the Philippines’ growth outlook, progress on tax reforms and its fiscal policies.
Fitch Ratings last affirmed the Philippines’ issuer default rating in December at “BBB” or investment grade with a stable outlook.
The latest reports show that most of the candidates endorsed by Duterte were able to book a seat in the magic 12 of the Senate race, although the results were not yet final.
Earlier, however, a unit of Fitch Group said the reduced opposition in the Senate with the imminent victory of the candidates favored by Duterte may not be good for the country in the long term.
Fitch Solutions Macro Research said 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.”
Fitch said the initial results showed Duterte’s favored candidates had performed well, with none of the opposition Liberal candidates gaining a seat. With 92 percent of the votes counted, nine of the 12 Senators were from the Duterte-favored Hugpong ng Pagbabago list.
Duterte’s PDP-Laban party also came top in the results initially released, and was expected to maintain its majority bloc in the House under the name ‘Coalition for Change’.
“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 in the passing of the 2019 budget,” Fitch Solutions said.
The budget impasse between the two houses of Congress resulted in the significant slowdown in economic growth in the first quarter to a four-year low of 5.6 percent from the 6.5 percent recorded a year ago. It was also slower compared to the 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,” Fitch Solutions said.
“Duterte will also face increased domestic pressure over his relations with China, with the majority of Philippine voters distrusting of the growing Chinese influence.
“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.”