The political turmoil in Mindanao’s Marawi City, which has been ravaged by an armed group affiliated with international terrorist network ISIS, is not likely to gnaw much on the Philippines’ growth prospects, British banking giant Standard Chartered said.
Stanchart has tempered its economic growth outlook for the Philippines this year but still sees the country growing at the fastest pace among Southeast Asia’s six largest economies.
In a recent briefing, Stanchart regional head of research for Southeast Asia Edward Lee said the bank had lowered the gross domestic product (GDP) growth forecast for the Philippines this year to 6.5 percent from 6.8 percent following the slower-than-expected performance in the first quarter. The same pace of growth is seen for 2018.
Robust domestic demand and steady services-sector growth are seen to continue to provide support while infrastructure investment is likely to be a swing factor.
The disappointing first quarter performance was largely due to weak investment growth but Stanchart sees growth picking up in the second half relative to the first half.
“Economic activity has slowed after a strong start to Duterte’s presidency. His administration has a strong focus on infrastructure investment; we now await delivery,” Stanchart said in a research note issued last week.
Stanchart expects the country’s fiscal deficit to widen to 3 percent of GDP this 2017 from 2.5 percent in 2016 on infrastructure spending. If the government delivers on its plans to increase public spending by 13.8 percent to P860 billion to raise infrastructure spending to 5.4 percent of GDP, the research said this should support growth in the near term.
“We believe political unrest in Mindanao will have only a minimal direct impact on growth,” the research said. “While Mindanao accounts for 13 percent of the Philippines’ GDP, the bulk of growth still comes from Metro Manila—it contributed 2.7 percentage points of the 6.9 percent growth in 2016.”
President Duterte has declared martial law in the whole of Mindanao following the crisis in Marawi. Since the terrorist attacks in Marawi on May 23, the military has cleared most of the territory although there was still intense fighting in some areas.