Great Expectations

PHILIPPINES - Forecast 08 Aug 2016 by Romeo Bernardo and Christine Tang

From a little known local politician this time last year, the one-month-old President of the Philippines, Rodrigo Duterte, now holds the record for the highest start-of-term level of public trust. He and his team have hit the ground running, exuding an air of impatience, no doubt intending to translate this political capital into meaningful reforms immediately. With government starting from a position of strength on the macro front, a number of “low-hanging fruits” that can be kick-started in the infrastructure front and the support of a super majority in Congress, we are optimistic that the economy can sustain its comparatively high growth. We have thus raised our GDP forecasts to 6.5% in 2016 and 6.6% in 2017, higher than the consensus.

However, the President’s non-economic priorities, starting with the shift to federalism and a bloody war against drugs, risk weaker-than-planned economic reform outcomes, e.g., unmet infrastructure targets, tax reform that does not meet revenue goals. For now, we are banking on his empowered economic managers to deliver the key items in the 10-point socio-economic agenda.

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