Japanese investment bank Nomura on Monday downplayed any negative impact of the political noise on the Philippine economy, saying the implementation of reforms and infrastructure projects will benefit the country in the long run.
This was contained in a report by Nomura after Philippine government officials held a briefing in Tokyo last week which was attended by 35 institutional investors and representatives from Japanese companies.
Filipino officials, while acknowledging the political noise and events in Marawi City, said growth stayed strong and was expected to strengthen in the second half from 6.5 percent in the second quarter.
“Overall, the key messages delivered by the authorities and the discussions with the private sector in the briefing continue to reinforce our long-held positive view on the growth outlook for the Philippines, anchored on better execution of reforms and progress on infrastructure,” Nomura said.
“As we have been arguing, the economic data is very solid despite the political noise,” it said, adding that the reforms under the Duterte administration looked more broad-based than what was likely appreciated by investors.
One of the government’s goals is to reduce the incidence of poverty from 21 percent to 14 percent of the population by 2022, when President Duterte steps down from office. Apart from improving infrastructure and other reforms, achieving the goals would involve reducing crime rates and pursuing the illegal drug trade and maintaining peace in Mindanao, according to government officials.
The government is also in the process of significantly shortening its negative investment list. The priority sectors include manufacturing, infrastructure-related construction, education and health services, public utilities, retail trade, telecoms and public procurement.
Nomura said the reforms might not be closely followed by market participants but they could be important, including the budget process, local government capacity building, changes to the negative investment list, monitoring systems of infrastructure projects and financial market reforms.
“The coordination between the various cabinet members”•the economics team and implementing agencies alike”•appears to be very solid and this should augur well for more progress on implementation,” Nomura said.
Nomura said the foreign direct investments inflow prospects still looked strong given the upcoming liberalization of more sectors and the rollout of infrastructure projects which would be partly foreign
funded.
“This should help provide an offset to the current account deficit, which we still expect to widen next year,” Nomura said.
The economy grew 6.4 percent in the first half but economic managers earlier said growth could be faster in the second half with the implementation of some infrastructure projects under the ambitious “Build, Build, Build” program.
The economy grew 6.9 percent in 2016, driven by higher fiscal spending, robust domestic demand and investments.