The other day, the London-based credit rating agency Fitch announced it would maintain its investment-grade rating for the Philippines, with positive outlook.
With all the recent political noise about the Philippines, especially from countries located across the English Channel from London, one might have expected, if not the rating itself, at least the outlook to drop, from positive to stable—no change expected—or maybe all the way down to negative—things could get worse, let’s watch these guys closely.
But no. Fitch is telling investors that the odds are better than even that the rating on the Philippines might even improve by another notch, regardless of the noise.
Fitch again noted with approval the country’s strong macroeconomic fundamentals, including low debt and ample reserves. But on the debit side, what was worrisome to the agency?
* * *
First, a narrow revenue base. Fitch wants to see the tax effort spread across a wider range of taxpayers and taxable transactions, in order to support the country’s growth and especially its ambitious infrastructure plans.
This should be noted by our honorable legislators, who ought to spend more time thinking about the comprehensive tax reform bills pending before them than about what their girlfriends might be screaming at each other.
Second, low levels of per capita income compared to our peers. Since it’s no secret that our country has always been poor, my guess is that this was highlighted by the agency at this time because they’re concerned that low consumer purchasing power may start to constrain our consumption-led growth.
And third, “weak governance standards.” This of course is their polite code phrase for the kind of political noise coming out of Europe about us, e.g. EJKs, the death penalty bill, lowering of the threshold for criminal liability to nine years of age.
Luckily for Fitch, what investors will probably notice instead is the strong law-and-order thinking that animates much of the domestic support for the President. Why should the well-intentioned foreigner get all riled up about these incidents when most of the natives are enthusiastically applauding?
In the end, what matters more to investors isn’t what a policy may be all about, but whether or not it’s supported by the majority, or at least not being actively criticized. Unpredictability, especially from generalized disorder, is what they hate most, and evidently it’s not what they’re seeing in our country right now.
* * *
For its part, the Makati Business Club also feels “highly optimistic” that our economy in 2017 will grow at least as fast as last year’s 6.8 percent, staying ahead of inflation or interest rate issues.
Among the 20 percent of members who responded (it ought to have been a bigger number, of course), 83 percent expected higher growth this year, 85 percent higher inflation, 80 percent a weaker peso, but only 57 percent expected higher interest rates. The much more bullish outlook on interest rates is the businessmen’s way of echoing what Fitch said about low debt and large fiscal space.
Interestingly, a significant number of them expected both exports and imports to fall. This expectation of lower trade volumes recognizes the relatively low commodity trade dependence of our economy. But at this time, it probably also incorporates rising worries about the implications of a protectionist Trump presidency, notwithstanding China’s eagerness to fill in any voids in trading partnerships that may be created.
* * *
The last bit of positive news this week placed the President at the lead of the pack among the notables being considered by Time magazine for its annual list of 100 most influential people in the world.
With 5 percent, Duterte is a good two points ahead of the second-placers, which include big names like Pope Francis and Bill Gates.
Some critics have been sniping that the results are influenced by an army of Duterte supporters flooding the online poll with their votes. But this begs the question: Why are these supporters doing that in the first place?
The quick and lazy answer is that they’re all paid trolls. This is the default response of his critics, who simply can’t bring themselves to believe that most of the rest of the country disagrees with them about the man.
To their thinking: If Duterte persists in being so popular no matter what they think, then obviously the rest of the country can only be wrong, because they are so obviously right. Which then leads the critics to pull their hair and wail: How can an entire country be led astray?
If these people bothered to talk to our OFWs in particular, they would get an earful about why Duterte is so popular in our overseas communities. These are the Filipinos who have to deal with the snide remarks and belittling attitudes in their host countries. These are the Filipinos who, after hearing one president after another promise to bring them back home, finally believe that this one, this president, truly means what he tells them.
These are the Filipinos—with not much to do in their spare time, a lot of computer access, and their loved ones back home always in their minds—who’ve been storming the digital gates on behalf of their newly adopted father figure, certainly the most influential figure for them if not the rest of the world.
The answer to the Duterte haters is right there staring them in the face: You’re outvoted just because you’re wrong about who should be leading the country. But the critics are going to have to be the ones to figure that out for themselves.
Readers can write me at [email protected]
