The Philippines’ Dapper Image Dents
Philippine shares continued near the head of the Asian pack with a Moody’s sovereign upgrade to BBB, despite a central bank rate hike and court rejection of the Aquino Administration’s unilateral fiscal stimulus through the Disbursement Acceleration Program. GDP growth was 7.5 percent in Q2 with net exports and domestic demand contributing evenly. The DAP had been used to fund infrastructure off budget and was mobilized in the aftermath of Typhoon Haiyan’s devastation as the government seeks to complete 60 projects in a range of sectors and boost FDI at just 1.5 percent of GDP. Even with the President’s anti-corruption push low “Doing Business” rankings in the World Bank’s reference reflect lingering access and administrative obstacles. Inflation has crept up to 5 percent on food and fuel prices and buoyant portfolio investor and remittance inflows which have kept the peso around 45/dollar. The political front had been calm until recently when coalition leaders allied with the President came under indictment and he hinted at amending the constitution to seek a second term. Since his mother won the office after Marcos’ ouster three decades ago a single six-year stay has been in effect and she also began negotiations with Mindanao secessionist rebels which were concluded under his watch. Such destinations now stress tourism and natural resource exploration as business process outsourcers in the capital Manila and other cities can draw from large English-speaking youth populations. The peaceful promotion there is in contrast with ASEAN rival Thailand where growth returned in Q2 but the full-year forecast was shaved to 2 percent. Infrastructure spending will come to 1 percent of GDP in the first phase of a five year plan approved by military rulers, who will delay election return until 2015. Visitor numbers have improved but bank credit increase was less than 5 percent in July with household debt at 80 percent of GDP. Public borrowing could also be heading toward the 50-60 percent danger zone and domestic saturation could revive external issuance desire. With auto and high-tech exports in a funk from the putsch import compression has been the main source of the small current account surplus which could slip to deficit next year according to analysts. The coup’s top general officially became prime minister as the King’s health continued to deteriorate prolonging his absence from the debate.
Banned parties have started to organize from exile, and the stock market has shrugged off the impasse with healthy double-digit gains as a dozen IPOs prepare to join. Airline and property listings are imminent, as a wave is also envisioned in Vietnam with minority sales of state enterprise stakes. The airways monopoly plans to raise $75 million from a 5 percent piece and will invite strategic partners to take 20 percent. Tourism jumped 10 percent through August and new Boeing planes are on order as TPP negotiations with the US try to avoid a hard landing.
