Duterte’s style may affect growth —Capital Economics

The leadership style of President Rodrigo Duterte—“erratic and crass”—may put off investors and weigh on growth prospects of the country, London-based economic research consultancy Capital Economics said in a recent report.

While the first two years of the Duterte administration has not been a disaster, his leadership style could put off investors in the long-term, Capital Economics senior Asia economist Gareth Leather said in the report “Philippines: A two-year progress report on President Duterte.”

There are signs that his leadership style is turning off investors, the economist noted.

“Two years after coming to power, President Rodrigo Duterte of the Philippines has not been the disaster for the economy that some feared,” the report read.

“Growth has remained strong, while economic policy has been left in the hands of technocrats, who have pushed through a number of sensible reforms,” it said.

The economy grew by 6.8 percent in the first quarter of the year, and by 6.7 percent for the full-year 2017.

“A longer-term concern, however, is Duterte’s erratic and crass leadership style, which is showing signs of putting off investors,” the report said.

“Since Duterte came to power, the stock market has underperformed, inflows into the country’s equity market have dropped, while pledges of foreign direct investment have fallen,” according to Capital Economics.

Duterte took his oath of office as the 16th President of the Philippines on June 30. At that time the benchmark PSEi closed at 7,796.25.

Since then, the PSEi has lost 619.82 points or 7.95 percent as it closed at 7,176.43 on Wednesday.

“If investment starts to slow sharply, medium-term growth prospects will suffer,” Capital Economics said.

Cid Terosa, dean of the School of Economics of the University of Asia and the Pacific (UA&P) noted there is a possibility that this will happen—but the chances are not yet apparent at this point.

“The country is not on that track yet. It’s a possibility but the chances of that happening aren’t significant yet,” he said.

“If the trend will continue for more than a quarter, then the economy could veer towards that track. The concerns are more externally-induced rather than internally-generated,” Terosa noted.

Terosa noted the escalating trade spat between the United States and China, the world’s two biggest economies, is a cause for concern.

“Yes, that’s the biggest concern. Small countries like the Philippines will bear the brunt of adverse events between large and powerful countries,” he said.

Capital Economics expects the Philippine economy to remain strong in the short-term.

“The upshot is that while growth is likely to remain strong in the short-term, helped by a combination of rapid credit growth, strong global demand and big increases in government infrastructure spending, the risks to growth are to the downside,” it said. —Jon Viktor Cabuenas/VDS, GMA News