Investments of global market players to the Philippines are seen to decline in the next two to three years due to the uncertainty that will be created by the end of President Aquino’s term in 2016, an international investment bank said.
In a research note on Thursday, Hongkong and Shanghai Banking Corp. (HSBC) said the country will sustain the country’s strong growth momentum due to private consumption. Investments, however, will decelerate due to investors’ concerns about political uncertainty.
“President Aquino’s term ends in June 2016. Investors are already asking about what impact an election might have on the economy and who might succeed the politician most associated with the country’s economic improvement,” HSBC economist Trinh Nguyen said.
Nguyen added that their forecast growth in 2015 and 2016 stays “solid” at 6.1 percent for both years, but noted investments are not seen to contribute much to this growth due to the investors’ worries over the next administration.
“Due to improved governance, much of it thanks to President Aquino, gross domestic product growth has exceeded the trend rate in recent years. But President Aquino’s term ends in 2016 and investors fret about political uncertainty,” Nguyen said.
“Uncertainty regarding the transition will probably mean investment will be sluggish; but favorable demographics, low household debt and steady remittance inflows will help consumption to remain strong in 2015 and speed up in 2016, thanks partly to election spending, in our view,” she added.
In the same research note, Nguyen listed a brief description and commentaries on the two leading front-runners of the 2016 presidential elections—Vice President Jejomar C. Binay and Interior Secretary Manuel Roxas II.
“Regardless of who wins the race, we can expect the nature and history of Philippine politics to cause investment behavior to be cautious but consumption strong,” Nguyen said.
“Whoever will take office in June 2016 will inherit an economy that has less debt, more able workers, fewer dependents, low borrowing costs and excess savings. We believe the Philippines, as an economy, in 2016, will be in the best shape in decades,” Nguyen added.