By Melissa Luz T. Lopez, Reporter

Martial Law in south won’t derail economy -- BMI

Posted on May 29, 2017

THE declaration of Martial Law in the southern Philippines is unlikely to derail the economy from sustaining growth of above 6% this year, analysts at BMI Research said, even as they flagged greater risk of political instability.

BMI analysts said the Philippines’ robust growth momentum is unlikely to be affected by President Rodrigo R. Duterte’s declaration of martial rule covering Mindanao and nearby islands amid terror attacks by the Maute group last week.

Mr. Duterte imposed Martial Law across the region on the evening of May 23, hours after Maute forces -- said to be sympathizers of the global extremist group Islamic State -- tore through Marawi City following a military raid.

Firefights have been ongoing since Tuesday as the rebels forced a takeover of Marawi, leaving at least 41 militants and 13 military killed as of Saturday, Reuters said in a report, while residents fled to neighboring towns for safety.

In explaining his decision to place Mindanao under military rule, Mr. Duterte said late Wednesday that he is also considering placing the entire Philippines under Martial Law should terrorist groups reach the Visayas and Luzon.

“President Duterte has also threatened to impose martial law across the country once again in order to combat the rise of the Islamic State. However, we do not see this as a prelude to a return of dictatorship in the Philippines or expect this to have a significant impact on the country’s economic growth outlook,” the Fitch unit said in a May 26 report, as it noted that the country’s political risk index score has been adjusted slightly to 63.1 from 63.5 previously.

A lower score signals heightened risk.

In March, BMI Research flagged rising political uncertainty in the Philippines in the aftermath of the arrest of his staunch critic Senator Leila J. De Lima, the shuffling of committee chairmanships in Senate, and the resignation of Vice-President Maria Leonor G. Robredo from the Cabinet.

Despite recent events, BMI analysts still expect the Philippine economy to expand by 6.3% this year, which if realized will be slower than 2016’s 6.9% but still among the fastest in Asia. This compares with the government’s 6.5-7.5% growth goal.

Economists and international credit raters have flagged rising political uncertainty under Mr. Duterte as the key threat to the country’s outlook, particularly with the controversial war on drugs and with rising “political infighting” among members of the administration.

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. described the market impact of the proclamation as “temporary,” while Finance secretary Carlos G. Dominguez III said the economy is “in no way threatened” by Martial Law.

BMI said financial markets have “recovered” from the knee-jerk reaction following the news, noting that the peso is likely to trade range-bound towards P50 to a dollar by yearend.