The Market Monitor Minding the Nation's Business
By Jerry Maglunog
With the 2016 presidential elections barely nine months away, it is evident that even international banks are now having a keen interest in the local political landscape.
Very recently, two global institutions gave a politically calibrated note about the country. One of the banks, Standard Chartered offered prescriptions to the next president.
Standard Chartered said that “spending on infrastructure is a greater concern”—a message for President Aquino, who has been criticized for underspending on infrastructure during the last five years of his presidency.
“During our visit to Manila in March, we learned that our clients were more concerned about the implementation of investment and infrastructure projects (47 percent) than the external environment (22 percent), market volatility (19 percent) or other non-economic factors (1 percent),” the bank said.
It added that “we believe unfavorable base effects played a part, as growth in infrastructure spending has been slower in 2014-15, versus double-digit growth in 2012-13. We think the most important feature of the 2016 budget is that it provides room for required spending.”
Standard Chartered said it is monitoring every move economic managers would make, particularly on spending on infrastruct and the effects the budget execution on the economy.
It added that it revised the 2015 budget forecast for the Philippines, due to strong government revenue growth and reduced public debt repayments, which have strengthened the country’s fiscal metrics.
“We now expect a budget deficit of 0.5 percent of gross domestic product (GDP) in 2015 (versus 1.9 percent), compared with 0.6 percent in 2014. We maintain our 2016 budget deficit forecast of 2 percent of GDP,” it said.
Standard Chartered is also surprised why the country’s budget for 2016 is 17 percent higher than this year to hit P3 trillion.
“This translates into a budget deficit of 2 percent of GDP. Aquino’s term ends on June 30, 2016, and the next presidential election is scheduled to be held on May 9, 2016,” the bank said.
Another bank, HSBC, said Interior Secretary Mar Roxas’s bid for presidency next year would be boosted by the recent endorsement of President Aquino, but doubts that it would mean his succession.
“Given that the Aquino administration is associated with much of the positive economic progress in recent years, Mar Roxas would likely gain from an official endorsement by Mr. Aquino, as he is behind (Vice President) Jejomar Binay in opinion polls,” the bank’s chief economist Trinh Nguyen said.
HSBC said Roxas should think of the result of the latest Social Weather Stations (SWS) survey, wherein he landed in far third among the three top presidential contenders.
“In the latest SWS poll (a face-to-face interview with 1,200 respondents), Sen. Grace Poe received 42 percent of support, followed by Binay (34 percent) and Roxas (21 percent),” the bank added.
The bank said whoever wins in next year’s elections, the next president should think about a lower public debt burden through greater revenue generation and more disciplined spending, stable macroeconomic growth and higher aggregate investment in the economy.
“With this track record, the Philippines has emerged as one of the bright stars of emerging Asia. The Philippines, thus, has overcome a substantial challenge in the past three decades: turning an economy that was saddled with debt and stagflation to one that enjoys steady growth and has low debt, both at the public and household levels,” HSBC said.
HSBC added the next president will inherit “a leaner economic machine.”
“Whoever wins the upcoming 2016 presidential election will inherit a much leaner economic machine, one that has weaned itself off high interest expenses and has accumulated savings and lowered the dependency ratio.
The bank also listed the two candidates’ facts and track record, presumably to give the public a clearer view about Roxas and Binay.
“Who is Roxas? He is currently the secretary of Interior and Local Government, appointed by President Aquino in 2012 and is the candidate for President Aquino’s Liberal Party.
An endorsement of Roxas by the President could provide him with extra support. His key messages are that he will continue the work started by the current administration and ensure that the “good governance (GG)” approach will remain in place.