Moody’s gloomy about Philippine growth if current problems persists

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U.S. rating agency Moody’s, which gave its first investment grade rating to the Philippines back in 2013, has warned that President Rodrigo Duterte’s deadly drug war and the armed Islamist insurgency in the south of the country would pose “rising risks” to the Philippine economy.

“The re-emergence of conflict in the southern Philippines, as well as the Duterte administration’s focus on the eradication of illegal drugs represents a rising but unlikely risk of a deterioration in economic performance and institutional strength,” the credit ratings agency said. 

Duterte is battling Islamic militants in the southern city of Marawi, while human rights groups have accused him of orchestrating a crime against humanity with police killing more than 3,800 drug suspects in his first 14 months in office. He also has growing problems with armed Communist groups and has threatened to declare country-wide martial law “if necessary.”

While the agency asserted that “sound economic and fiscal policies” including a focus on infrastructure development would “balance out political and other risks,” it said in a country report released on September 15 that if martial law, imposed by Duterte in the south to stop the Islamist threat, was declared elsewhere in the country it could upset this balance, undermine both foreign and domestic business confidence and disrupt economic activity.

The report, however, affirmed Moody’s short-term 6.5 per cent GDP growth forecast for the Philippines this year and 6.8 per cent in 2018, saying that the coutnry’s economic strength was “high” and “driven by its capacity to absorb shocks” amid its rapid growth, large scale and economic diversification.

But it also noted that the business climate and infrastructure quality of the Philippines remain weak after it fell ten notches in the 2016-2017 Global Competitiveness Report of the World Economic Forum, mainly owing to inefficient government bureaucracy and inadequate supply of infrastructure.

Moody’s also cited “continued uncertainties” over Duterte’s proposed comprehensive tax reform law that Congress had yet to pass.

Anti-Duterte protests are planned for September 21, the 45th anniversary of the imposition of martial law by the late dictator Ferdinand Marcos, who was ousted in a bloodless “People Power” revolution in 1986. Some have indicated Duterte could use the protest to expand martial law all over the Philippines.

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U.S. rating agency Moody's, which gave its first investment grade rating to the Philippines back in 2013, has warned that President Rodrigo Duterte’s deadly drug war and the armed Islamist insurgency in the south of the country would pose “rising risks" to the Philippine economy. “The re-emergence of conflict in the southern Philippines, as well as the Duterte administration’s focus on the eradication of illegal drugs represents a rising but unlikely risk of a deterioration in economic performance and institutional strength,” the credit ratings agency said.  Duterte is battling Islamic militants in the southern city of Marawi, while human rights...

Reading Time: 2 minutes

U.S. rating agency Moody’s, which gave its first investment grade rating to the Philippines back in 2013, has warned that President Rodrigo Duterte’s deadly drug war and the armed Islamist insurgency in the south of the country would pose “rising risks” to the Philippine economy.

“The re-emergence of conflict in the southern Philippines, as well as the Duterte administration’s focus on the eradication of illegal drugs represents a rising but unlikely risk of a deterioration in economic performance and institutional strength,” the credit ratings agency said. 

Duterte is battling Islamic militants in the southern city of Marawi, while human rights groups have accused him of orchestrating a crime against humanity with police killing more than 3,800 drug suspects in his first 14 months in office. He also has growing problems with armed Communist groups and has threatened to declare country-wide martial law “if necessary.”

While the agency asserted that “sound economic and fiscal policies” including a focus on infrastructure development would “balance out political and other risks,” it said in a country report released on September 15 that if martial law, imposed by Duterte in the south to stop the Islamist threat, was declared elsewhere in the country it could upset this balance, undermine both foreign and domestic business confidence and disrupt economic activity.

The report, however, affirmed Moody’s short-term 6.5 per cent GDP growth forecast for the Philippines this year and 6.8 per cent in 2018, saying that the coutnry’s economic strength was “high” and “driven by its capacity to absorb shocks” amid its rapid growth, large scale and economic diversification.

But it also noted that the business climate and infrastructure quality of the Philippines remain weak after it fell ten notches in the 2016-2017 Global Competitiveness Report of the World Economic Forum, mainly owing to inefficient government bureaucracy and inadequate supply of infrastructure.

Moody’s also cited “continued uncertainties” over Duterte’s proposed comprehensive tax reform law that Congress had yet to pass.

Anti-Duterte protests are planned for September 21, the 45th anniversary of the imposition of martial law by the late dictator Ferdinand Marcos, who was ousted in a bloodless “People Power” revolution in 1986. Some have indicated Duterte could use the protest to expand martial law all over the Philippines.

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