Japan’s nomura bullish on PH economic growth prospects

Given solid economic fundamentals and the plan to ramp up infrastructure spending, not even President Duterte’s rhetoric would deter the Philippines’ growth in the medium term, Japanese financial giant Nomura said.

In an Oct. 20 report titled “Philippines: Beyond words,” Nomura said “Duterte’s controversial rhetoric is unlikely to derail reform prospects and growth,” such that the economy was seen growing 6.7 percent this year, 6.3 percent next year and 6.5 percent in 2018.

“Unlike the rest of the region, potential growth has risen and could rise further given favorable demographics and higher investment in the Philippines despite political noise,” Nomura said.

The target to raise infrastructure spending to 7 percent of the gross domestic product (GDP) by 2022 also augurs well to sustaining economic growth, it added.

“We expect the Duterte adminstration to make more progress than its predecessor on infrastructure spending, as past reforms allow it to hit the ground running and expedite project approvals; plugging the infrastructure deficit aligns well with the overarching goal of inclusive growth and Duterte is from Mindanao which is home to some of the least developed areas, and the cost of congestion in economic centers, if left unchecked, is set to rise rapidly,” the report read.

Also, “the bulk of the projects are related to transport infrastructure and the proposed 2017 budget affirms this focus, alongside an emphasis on raising spending efficiency and enhancing PPP [public-private partnership] schemes,” it added.

Nomura is also bullish about the Duterte administration’s 10-point socioeconomic agenda aimed at slashing the poverty rate to 17 percent in 2022 from 26 percent at present.

“There are early signs of strong adherence to the 10-point economic agenda, which stresses policy continuity and more reforms. We think the government will likely make steady progress on cutting red tape and corruption, which we view as a credible commitment from Duterte given his track record in promoting good governance in Davao,” Nomura said.

Nomura added that it expects the proposed tax policy reform program to be implemented by the administration following Congress’ approval.

“These changes are positive for FDI [foreign direct investment] inflows, which are already structurally on the rise, helping generate more jobs and supporting external balances,” it said.

For Nomura, it helps that “President Duterte inherited an economy that is far easier to manage than what his predecessor, President Aquino, found when he took office in 2010,” with the new administration enjoying a strong, domestic demand-driven growth momentum.

“The concerns that economic policymaking is pivoting to a different (and narrower) focus, while not completely unjustified, seem overdone at this point… The underlying policy approach is to carry over the policies of the past administration that were working well and enhance those that need to be made more effective, leveraging a strong political mandate and Duterte’s decisive leadership style,” Nomura said.