HSBC: Aquino gets credit for sterling economy

Whoever wins the presidency in 2016 will inherit a Philippine economy poised for further sustainable growth leading to more significant reductions in poverty, thanks to administration policies in the last five years.

British bank HSBC, which is among the most bullish financial institutions over the Philippines’ prospects, said President Aquino deserves much credit for helping steer the economy onto its current path.

The Aquino administration’s main achievements include lowering the country’s debt burden through greater revenue collection and disciplined spending, stable macroeconomic growth, and higher levels of investment in the economy.

“With this track record, the Philippines has emerged as one of the bright stars of emerging Asia,” HSBC economist Trinh Nguyen said in a note to clients.

She said recent reforms have helped the economy overcome fiscal constraints that burdened governments of the past three decades. The Philippines now enjoys steady growth and low debt, freeing up more resources for spending on vital projects.

In 1990, over a third of the government’s budget was earmarked to pay for interest, reflecting high levels of debt accumulated during the Marcos years.

Interest payments have declined recently. By 2016, only 15 percent of the state’s budget will be set aside for these.

The winner in 2016, Nguyen said, inherits an economy that has “weaned itself off high interest expenses and has accumulated savings and lowered the dependency ratio.”

Interior and Local Government Secretary Mar Roxas, who was recently appointed as the administration’s standard-bearer, is expected to benefit the most from this legacy of good governance. Roxas’ campaign hinges on his image as the candidate most likely to continue President Aquino’s reform agenda.

“Given that the Aquino’s administration is associated with much of the positive economic progress in recent years, Mar Roxas would likely gain from an official endorsement by Aquino,” Nguyen said.

“His key messages are that he will continue the work started by the current administration and ensure that the ‘good governance’ approach will remain in place,” she said.

However, Roxas will still face an uphill battle, HSBC said. Roxas still trails in opinion polls behind Sen. Grace Poe, who has not officially declared a run for the nation’s top office, and former Makati Mayor Jejomar Binay, who beat Roxas for the vice presidency in 2010.

“When (Binay) was mayor, he provided free education and healthcare in Makati,” Nguyen noted.

“The next president… will likely shift the focus towards greater infrastructure investment, including electricity generation and transportation networks, in order to accommodate years of rapid growth,” she said.

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