The Philippine mid-term elections put investors on alert for any change in government policies, because the World Trade War exposes weaknesses in one of the fastest economies in Asia.
The vote to choose 12 senators, more than 300 members of the congress and nearly 18,000 local officials intervene while decision -makers aim to strengthen investments and consumption in the context of a more difficult external environment. It will also be a crucial test for President Ferdinand Marcos Jr. and his distant vice-president Sara Duterte, who supports the competing candidates.
“Investors are looking at whether the elections will lead to continuity that will guarantee economic reforms,” said Jonathan Ravelas, director general at EMAGRAGE FOR BUSINESS AND MARKETING SERVICES, A Manila -based advice. “The Philippines cannot afford to have political instability, especially during this period of global uncertainty.”
The economy increased by 5.4% in the first quarter compared to the previous year, slower than expansion forecasts of 5.7% by analysts, but slightly faster than the pace observed in the last quarter of 2024, according to data published Thursday. The government is targeting growth of at least 6% this year after aSlower than projectedExpansion of 5.7% in 2024, although the economy still exceeds most of Asia.
A Philippine commercial delegation finished the first talks with US officials last week with more probably because Manila seeks to reduce the price offered by the Trump administration by 17%. The planned levy is much lower than those threatened against most of Southeast Asia, including a rate of 46% on Vietnam, and political decision-makers see the possibility of gaining a competitive advantage, if they can continue interior reforms.
“While prices create opportunities to transfer supply chains, EU investors remain cautious about long -term operational ineffectures,” said the president of the Philippines, the president of the Philippines, Paulo Duarte. “To enter this strategic window, the government must focus on reducing operational costs and improving the ease of business.”
The young English-speaking workforce in the country is a big asset for the economy, but the challenges abound, said Ebch Hinchliffe, executive director of the American Chamber of Commerce of the Philippines. They include administrative formalities, infrastructure and connectivity, energy costs and regulatory unpredictability, he said, echoing the concerns that have haunt Philippine companies for decades.
While the Philippines promulgated legislation to attract investors, including a Measure that reduces taxes on companies And the abolition of foreign property limits in the sectors, including renewable energies – companies want more reforms. But a trembling political situation after mid-term could maintain government attention on the essential changes.
The finance secretary, Ralph Recto, withdrew a proposal last month which aimed to increase capital gains, donors and inheritance taxes to 10%, against 6%, citing a large tax collection in the last three months. The bill would generate approximately 300 billion pesos ($ 5.4 billion) of additional income over the next five years.
Winning legislators will have bread to work when they realize the new congress in July. Loading bills include a measure to prohibit raw mineral exports to stimulate downstream mining industry, a plan strongly opposed by a local association of the nickel industry.
And awaiting Marcos' signature, an invoice reduces the 0.1% stock transaction tax against 0.6% to make the country more attractive compared to the neighbors of Southeast Asia. But he also submitted foreign companies to a 25% tax on the obligations made in dollars from the Philippines.
The average yield on local assets during a mid-term electoral year was negative of 0.3%, on the basis of surveys which have been covered from 1995, against 12% of the gains during the years of presidential election since then, according to Ritchie Ryan Teo, director of investments at Sun Life Investment Management and Trust Corp.
“Inflammmed disagreements between the parties occurred during the previous elections that did not derail the capacity of the Congress to adopt laws and budgets,” said Teo. “We are carefully optimistic, but it is definitely a space to look at.”
The outcome of the election is particularly critical for Duterte, because the 12 elected senators will be among the jurors of the accusation of the vice-president which begins in July.
“Companies do not seem to care as long as it does not spread in their lawn or their net profit,” saidDereck AWA main analyst at Control Risks. “If anything, some are even relieved that politicians are too busy arguing with each other to get involved in business, which the Philippine government is known for doing.”
Consumption, fed by the sending of funds from the Philippins working abroad, which returned to the house aRecord $ 38.3 billionLast year, represents around 70% of the country's economic production. Manufacturing is less than 20%.
Amando Tetangco, a former governor of the Central Bank who now chairs the first Conglomerate SM Investments Corp., said that consumer -oriented economy is increasing well for the Philippines at an increased global risk.
“This structure gives us some protection. We are less vulnerable,” said Tetangco. “We can be less open than other countries (in terms of trade), but in this current environment, it provides us with a certain isolation from potential adverse effects of developments.”
The Philippine's reference stock market index dropped by 1% in the year until May 7, dragging the 5% gain in the MSCI Asia Pacific index. Local bonds gave investors in dollars a gain of 6.3%, while the Peso increased by around 4%.
“If you look at the last 20 years about 20 years, we have had many of these political noises, but the political instructions have largely remained the same,” said the secretary of economic planning Arsenio Balisacan in an interview. “What matters is that political noise will not reversal what is otherwise a good policy,” he said.
For Teresita Sy-Coson, whose family leads SM who has interests in the bank, ownership and retail, the way to follow is to raise the shoulders of politics. “We simply continue with the company, we do not listen to the noise,” she said.
This story was initially presented on Fortune.com
