Investors bullish on post-election RP economy

Published by rudy Date posted on May 18, 2010

MANILA, Philippines—Investors see the outlook for the economy after the elections as positive as the presidential candidates considered by the business sector as capable of moving the country forward are leading in the surveys, according to a paper by the Standard Chartered Bank.

Confidence of investors is crucial for the performance of an economy as this determines investments which are tantamount to job creation and higher aggregate income, said the study, “Philippines-Time for the Showdown,” which was released Friday.

Standard Chartered said the platforms of Sen. Benigno Aquino III and Sen. Manuel Villar, who were leading in the presidential surveys at the time of the study, were encouraging for businessmen who see brighter prospects for the economy once a new administration takes over.

The two candidates are giving investors the comfort that the business climate in the country will improve should any of them win the presidential race, the bank said.

Pro-business

The “pro-business” platforms of Aquino and Villar provide “credible approaches to tackling structural impediments to economic development,” Standard Chartered said.

Three of the key platforms of the two leading candidates center on fiscal consolidation, infrastructure development and improvement of the business environment.

These platforms address the major concerns of investors about the Philippines, the bank said.

“Overall, we see both front-runners addressing issues that have impeded foreign investment in the past. Appropriate policies and incentives could attract the necessary capital to close the country’s infrastructure gap, allowing the Philippines to benefit from increasing regional integration,” it said.

Standard Chartered expects the gross domestic product to grow by 3.3 percent this year, faster than the 0.9 percent registered in 2009. The growth forecast is within the government’s own target of between 2.6 and 3.6 percent.

Major growth driver

The bank said a major growth driver for the Philippines this year is still remittances from overseas Filipino workers. Remittances fuel household consumption, which provides a large boost to the economy.

Standard Chartered said the widening lead of Aquino over Villar in the recent surveys was also encouraging to some business industry players.

It said that a president-elect winning by a large margin would reduce the chances of protests and add to the credibility of the election results.

Despite concerns over the reliability of the automated election system being used in the country for the first time, Standard Chartered expressed confidence that the elections on Monday will not encounter problems significant enough to threaten the economy.

“Our base case is that the elections will run smoothly,” it said.

Nonetheless, it said the peso may continue to be volatile until the final results of the presidential election are out.

After breaking into the 44-to-the-dollar territory in April, the peso reverted to the 45-level the other day because of investors’ election-related concerns.

“Near-term, [the peso-dollar rate] is likely to be choppy and trendless on seasonal factors, positioning and fragile risk appetite,” said Standard Chartered.

Most forecasts, however, see the peso stabilizing once the elections turn out to be orderly and credible. –Michelle Remo, Philippine Daily Inquirer

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