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Think tank: ‘Brutal’ drug war a risk to economic growth

By: - Reporter / @bendeveraINQ
/ 12:12 AM January 28, 2017

Barcelona-based FocusEconomics expects the Philippines to be the most resilient economy in the Asean region alongside Vietnam, even as the economic analysis provider sees slower growth due to a mix of external and domestic risks, including President Duterte’s war on drugs.

“The Philippines and Vietnam will be among the top performers, with projected expansions of 6.4 percent,” FocusEconomics said in a Jan. 25 report. FocusEconomics raised its growth projection for the Philippines from its panel’s forecast of 6.3 percent in December.

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Its forecast, however, was below the government’s 6.5-7.5 percent target for 2017.

In a separate Jan. 24 report, FocusEconomics said this year’s gross domestic product (GDP) growth “should remain robust, [even if] moderating slightly.”

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The government reported Thursday that the Philippine economy expanded by 6.8 percent in 2016, the highest in three years. This also meant the country grew the fastest among its neighbors in Asia, exceeding the growth rates posted by China and Vietnam.

“The solid performance of private consumption and expanding infrastructure spending will underpin economic activity,” FocusEconomics said.

However, “a possible tightening in financing conditions, an incomplete implementation of the reform plan and a deterioration in business sentiment due to the brutal nature of President Duterte’s war on drugs are the main downside risks to the outlook,” according to FocusEconomics.

For 2018, FocusEconomics sees the Philippine economy further expanding, albeit at a slower 6.3 percent.

Across the region, FocusEconomics said “developments in the external sector and global politics will continue to influence Asean’s growth story.”

“The policy decisions of a more protectionist US under President Donald Trump have the potential to reverberate throughout the region. Trump’s decision on Jan. 23 to pull out from the 12-country Trans-Pacific Partnership has created uncertainty over the future of the deal, which was seen as particularly beneficial for Vietnam’s economy. At this stage, it is unclear whether the agreement will move forward without the US or if a new alliance could take its place,” the intelligence provider added.

It said the United Kingdom’s exit from the European Union, or Brexit, would also play a crucial role in the Asean story, particularly that of Singapore. Elections in Malaysia and Thailand should also be monitored, it added.

“The FocusEconomics panel sees the Asean region growing 4.7 percent, which is down 0.1 percentage points from last month’s forecast. Reduced headwinds from less monetary and fiscal stimulus will limit the economy’s momentum, but domestic demand should still remain solid overall,” it added.

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TAGS: ASEAN, Business, drug war, economic growth, economy, FocusEconomics
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