Supertyphoon “Yolanda” and the pork-barrel scam are two potential “game changers,” that can affect investors’ sentiment in the Philippines, according to a think tank based in New York.
Global Source said investors could be closely monitoring the pace by which the government implements recovery measures in calamity-stricken areas, as well as its ability to keep public spending growing even amid the pork-barrel controversy.
“Two extraneous events—the shock from Typhoon Haiyan [local name Yolanda] and the impact of the pork barrel controversy on government spending—are, in our view, potential game changers that … are likely to have a chilling effect on moods all around,” Global Source said in its latest commentary on the Philippines.
It said it would temporarily slash its growth projections for the Philippines for this year and in 2014 while waiting for developments involving post-calamity recovery efforts and public spending.
Global Source has cut its economic growth target for this year from 7.2 to 6.8 percent, and for next year from 6.2 to 5.8 percent.
Apart from securing an investment grade from international ratings agencies earlier this year, the country’s economy continues to be spurred by the rise in government spending.
The Philippines grew by an average of 7.4 percent in the first three quarters, becoming the fastest growing economy in Asia next to China.
But Global Source cautioned that the nascent trend of rising investments could be disrupted by the latest calamity and the pork-barrel scam.
“We note that economic activity moving forward will depend on changing sentiments, with government action critical to rebuilding confidence,” it said.
Supertyphoon Yolanda, which struck the country in November, could pull down economic growth of the Philippines in the fourth quarter anywhere from 4.1 to 5.9 percent, based on government estimates.
Global Source said the ability of the government to carry out recovery measures would be crucial in keeping investor sentiment.
The pork-barrel scam, through which government funds entrusted to legislators allegedly were used to fund ghost projects, has led to public scrutiny of public spending.
Global Source said the government should be able to maintain significant spending if it were to encourage the flow of investments into the country.