A London-based think tank sees annual economic growth in the Philippines to slow down to an average of 5 percent over the next five years under the rule of President-elect Rodrigo Duterte.
“Although economic growth is set to slow, the Philippines will still boast one of the highest rates of real GDP growth among its Southeast Asian neighbors,” the Economic Intelligence Unit said.
EIU said in a report titled “Strongman rising: What a Rodrigo Duterte presidency will mean for the Philippines” that the country’s economy would likely expand 5 percent annually from 2016 to 2020, slower than the average 6.2-percent expansion in the six-year term of Aquino administration.
“Mr. Duterte inherits a fairly robust economy and he will be hard-pressed to shake its established fundamentals in the short term. The Economist Intelligence Unit therefore believes that the economy will expand by at least 5 percent a year in 2016 to 20,” the think tank said.
EIU said despite Duterte acknowledging the economy did well in the Aquino administration and stated to continue its policy agenda, he still made foreign investors “jittery”.
“We expect capital inflows to slow until there is further clarity on his economic team and its strategy. Our basic assumption is that private consumption, fueled largely by the inflow of remittances, will hold up despite any political turmoil,” it said.
EIU also said that under the scenario of the incoming administration continuing its predecessors’ policy stance, Duterte would be open to foreign direct investments and would adopt measures to boost competition in the domestic economy.
“We assume that policy implementation will be a key challenge and any progress is likely to be slow. The president-elect’s antagonistic attitude towards Congress [the legislature] and his threats to shut it down should its members not cooperate with his agenda are signs that his presidency could be tempestuous,” it said.
“Clashes between the executive and the legislature could end up undermining government effectiveness more generally. Efforts to challenge incumbent elites will also run up against vested interests,” it said.
It said Duterte’s focus to curb crime in a given period could also slow down economic growth. “We see a significant risk that Duterte will prioritize security at the expense of pursuing development goals,” the report read.
“We believe that under these circumstances, private investment would weaken, as some businesses become more concerned around the rule of law and political stability, and some of the Philippines’ major trading partners are deterred by concerns about human rights violations,” it said.
“We believe that the new president is likely to be so focused on his internal law-and-order drive that he leaves the management of the economy to eminent advisers and established lawmakers. His tough-man approach is still likely to retard the development of the country’s institutions, but this will not exert a significant drag on economic growth in the short-term,” the think tank said.
