Investors await next President’s moves on economy
Investors are curious to see if the next administration will further open up the economy to attract more foreign capital, especially in infrastructure, DBS Bank Ltd. said Wednesday.
“Whoever wins the presidential election in May will have plenty to prove. One to watch closely is what the next government will do to step up investment growth,” Southeast Asia’s largest bank said in a research note.
DBS noted that revenue collections had been growing at a “strong” average annual rate of 12 percent during the first five years of the Aquino administration, such that there was room for an “infrastructure overhaul” via the centerpiece public-private partnership or PPP program.
“Total investment growth contributed about a third of the economic growth seen during Aquino’s term. And investment is the key that could sustain robust consumption growth and potentially bring overall GDP [gross domestic product] growth to 7-8 percent trend,” DBS said.
The economy grew a dismal 5.8 percent last year, while economic managers had slightly cut to 6.8-7.8 percent the GDP expansion target for this year as government expenditures on public goods and services have remained below program despite loads of cash just waiting to be spent.
According to DBS, “it is also important to watch if the next government supports the easing of foreign ownership limits.”
President Aquino was firm that the 1987 Constitution—put in place by his mother, former President Corazon—will never be amended during his watch, even as business groups had been seeking further liberalization of its economic provisions.
DBS noted that foreign direct investment (FDI) “continues to be dwarfed by foreign worker remittances, growth of which has been sustained every year in the past decade.”
The latest Bangko Sentral ng Pilipinas (BSP) data showed that as of end-November last year, total FDI declined 3.4 percent year-on-year to $5.452 billion.
The BSP had set targets of $6 billion and $6.3 billion in FDI for last year and this year, respectively. The end-2015 FDI data will be released today.
Cash sent home by Filipinos abroad, meanwhile, hit a record $2.47 billion last December—the biggest monthly amount to date—to bring the 2015 total to $25.767 billion, also the highest annual figure.
End-2015 cash remittances grew 4.6 percent year-on-year, exceeding the 4-percent growth target.
For 2016, the increase in remittances was projected at a similar 4 percent.
But while “strong remittance flows are definitely a positive for the macro risk profile,” DBS cautioned that such also “triggers questions about the dynamism of the local economy, especially since foreign worker remittances make up almost 10 percent of the economy.”