Foreign investors spooked?

By: Victor Anthony V. Silva December 19,2016 - 09:41 PM


Think tank: Digong’s ‘erratic behavior’ may discourage fresh investments from coming in; biz heads agree

Business leaders in the retail and export sectors in Cebu are seeing signs today of what a London-based think tank has foreseen about the country’s economy and foreign investors in 2017.

Robert Go, president of the Philippine Retailers Association in Cebu, said he believed the economic forecast of a London-based economic research consultancy firm, Capital Economics, is happening today.

According to Capital Economics in an Inquirer report, the Philippines would be expected to sustain robust economic growth in 2017, but the firm said that President Rodrigo Duterte’s “erratic behavior” might discourage fresh investments from coming in.

“What the think tank says is actually happening already. It’s not only the US, but also Europe that’s postponing aid and investments. There are few DFIs (direct foreign investments) coming in compared to previous years, and we have more capital outflow than inflow,” said Go in a phone interview yesterday.

Conflicting statements

In a recent Inquirer report, Capitol Economics was quoted as saying that it was concerned by the increasingly “erratic behavior” of President Duterte, having made controversial as well as conflicting statements that have confused the public.

One example was his announcement to separate from the US in economic and political aspects after current President Barack Obama criticized Duterte’s bloody campaign against illegal drugs.

But after the victory of President-elect Donald Trump in the Nov. 8 US elections, Duterte said he looked forward to having “improved relations” between Manila and Washington.

Growth to continue

According to Capital Economics, the country’s strong fundamentals mean growth should remain strong next year, but there is an increasing risk that Duterte will make it hard for the Philippines to attract big-ticket infrastructure investments needed to establish long-run development.

Go said it is fortunate that the Philippines is enjoying robust economic indicators due to sustained initiatives from previous administrations, but some of these may be slowly faltering in 2017.

Other factors

Apolinar Suarez, Jr., chairman of the Philippine Exporters Confederation (Philexport) in Cebu, said Duterte’s way of doing things might discourage investors from putting their money in the country.

“(His way of doing things) is quite hard to understand, especially coming from a more traditional president. On a macro level, any investor has his perspective, too,” Suarez added.

He said the president’s pronouncements aren’t the only factor that affects investor sentiment, but other global events such as the United Kingdom’s so-called Brexit, Trump’s victory, and the US Fed’s plan to hike interest rates further in 2017.

Nonetheless, the report was optimistic that “despite continued political uncertainty, the Philippines is also likely to do well, with government spending and rapid investment set to remain key drivers of growth.”

China, other countries

Glenn Soco, Mandaue Chamber of Commerce and Industry (MCCI) president, however, said that he did not believe that Duterte’s “erratic behavior” would deter investments particularly from the US from coming in.

He said that even if there would be change in policies with the US, the serious interest of China and other countries in the Philippines would negate these predictions.

“The fundamentals are in place for our country to grow stronger in the medium and long term,” said Soco, citing the Philippines’ 7.1-percent growth in this year’s third quarter.

Capital Economics also said that the economy is continuing to grow at a decent pace, supported by strong investment, a thriving business process outsourcing sector as well as high levels of business and consumer confidence.

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TAGS: Barack Obama, business, Capital, Capitol Economics, DFI, direct foreign investment, Duterte, Economic forecast, Erratic Behavior, Glenn Soco, illegal drugs, inflow, London, Mandaue Chamber of Commerce and Industry, outflow, PhilExport, Philippine Exporters Confederation, Philippine Retailers Association, Philippines, President, retailer, Rodrigo Duterte

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