By Riza Lozada
Economic experts do not see the martial-law declaration in Mindanao and the Resorts World Manila (RWM) tragedy to have a lingering effect on the economy, as the National Economic and Development Authority (Neda) maintained its projected growth forecasts for this year and next, given the Philippines’ strong economic fundamentals.
“We are keeping our (gross domestic product) growth targets of 6.5 percent-to-7.5 percent this year and 7 percent-to-8 percent next year,” Neda Director-General and Socioeconomic Planning Secretary Ernesto Pernia said in a press briefing on the launch of the Philippine Development Plan (PDP), the blueprint for the country’s development under the Duterte administration.
Pernia noted that the fighting in Marawi City is being contained already.
“We are quite optimistic this is a short-lived aberration from normal,” he said.
Meanwhile, an official of an investment house remains optimistic on the domestic economy.
BDO Capital and Investment Corp. (BDO Capital) President Eduardo Francisco said he does not have any qualms on the ongoing martial rule in Mindanao, “as long as civil rights and citizens’ right are followed.”
He traced this optimism to authorities’ statements, saying the Duterte administration will heed the law vis-a-vis the martial-law declaration.
“While we don’t really know what’s happening from Manila, we hear from our Mindanao clients that they welcome martial law, because it gives them stability,” he said.
Francisco said market players have shrugged off worries on the martial-law declaration, citing that the local bourse even posted increases.
“That shows that the market is deep and the investors can tell the difference between an isolated event and a big problem,” he added.
President Duterte declared on May 23 martial law in the entire Mindanao island, which would last for 60 days.
Pernia said the Development Budget Coordination Committee (DBCC) would meet this week to review macroeconomic and fiscal programs.
“We believe that the objective (of the martial-law declaration is) to secure peace in that area. That is the objective, and if that is done and within a limited of time, then it will be good as well,” said Neda Undersecretary Rosemarie Edillon.
Pernia also downplayed the impact on the economy of the June 2 attack on Resorts World Manila, which was considered just an isolated robbery, rather than a terrorist assault.
For her part, Neda Undersecretary Adoracion Navarro said “let’s just observe how the investors will react. It’s too early to tell… I’m optimistic the (economic) fundamentals do not change.”
Resorts World Manila reported that at least 37 hotel guests and employees died of suffocation killed by smoke inhalation and another 54 injured in the stampede after a lone gunman assaulted the hotel-and-casino complex around midnight last Friday.
Moody’s Investors Service rules out an immediate impact of the declaration of martial law in Mindanao on the economy.
“The ongoing siege and imposition of martial law will not materially impact the country’s robust near-term economic outlook,” Moody’s said in a research note.
It expects the impact of the current situation in Marawi City, Lanao del Sur province,“to be minimal and short-lived.”
It noted that, “although unlikely to happen, potential challenges to the constitutional system of checks and balances could arrest or reverse the improvements in the rule of law over the past few years.”
Moody’s said martial law is limited to 60 days under the 1987 Philippine Constitution, and since authorities have said that they have taken control of a great part of Marawi City, any extension of martial law is not needed.
The President earlier said he was open to declaring martial law to address the problem of illegal drugs, which, on the other hand, did not fall under the definition of “cases of invasion or rebellion.”
However, statements by officials from the Executive department said the government will honor the law made.
Moody’s economists discount the extension of martial rule “beyond the resolution or dissipation of the immediate threat posed by the Marawi crisis.”
With this overall situation, Moody’s is maintaining its 6.5-percent growth projection for the country this year.
“Along with enhancements to government effectiveness and the control of corruption, the greater policy predictability afforded by better rule of law has underpinned a more favorable environment for economic growth and investment in recent years,” it said.
Moody’s explained that “it is unlikely recent developments in Mindanao will lead to changes in economic and fiscal policies, which continue to be anchored by Duterte’s well-articulated 10-point Socioeconomic Development Agenda that seeks to improve revenue generation through tax reform, lift infrastructure spending beyond 5 percent of GDP, and increase investment in human capital and development, among other measures.”
“However, if recent events lead to prolonged uncertainty around security or governance, such a development would eventually dampen business confidence and, consequently, economic outcomes,” it added.
Jose Mario I. Cuyegkeng, senior economist at ING Bank N.V. Manila, said market participants are not considering a possible constitutional conflict that may arise as a result of the martial-law declaration.
“A constitutional crisis may develop if the Supreme Court or Congress decides that martial law has to be lifted or its scope reduced. The President last weekend threatened not to listen or obey the decision of the Supreme Court or Congress and would prefer to listen to the security forces,” Cuyegkeng said in a market report.
“Market is not taking the potential constitutional crisis seriously since Congress is likely to support the decision of the President,” he added.
Cuyegkeng said investors remain focused on the Philippines’ strong macroeconomic fundamentals, which has been providing some support for the peso.
“(M)arkets continue to focus on the strong economic fundamentals and the limited impact of the hostilities to overall economic activity,” the economist said, referring to the recovery of the peso last week despite the martial-law declaration.
“These are unlikely to be affected for now by the declaration of martial law and the threat to bring this to central and north Philippines,” he added, referring to threats made by Mr. Duterte that he may place the entire country under military rule should the terror attacks spill over to the other regions.