PH’s war on drugs likely has short-term impact on FDIs – HSBC

MANILA, Philippines – Deaths linked to President Rodrigo Duterte’s all-out campaign against illegal drugs could potentially turn off foreign investors, with the Philippine economy seeing a short-term slowdown in foreign direct investments (FDIs), said the Hongkong and Shanghai Banking Corporation (HSBC).

“We do see some challenge in [terms of] foreign investors’ perception on the latest measure taken by the new government,” Cheuk Wan Fan, HSBC head of Investment Strategy Asia, said in a media briefing in Makati City on Tuesday, January 17.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed a slowdown in FDIs in October 2016. (READ: PH economy to stand out in Asia in 2017 – HSBC)

The BSP said FDIs registered a $342-million net inflow in October 2016, a decline from $399 million in 2015 and from $469 million in September 2016.

From July 1, 2016 to January 17, 2017, there have been over 6,700 deaths linked to Duterte’s war on drugs – both from legitimate police operations and vigilante-style or unexplained killings (including deaths under investigation). (READ: IN NUMBERS: The Philippines’ ‘war on drugs’)

HSBC discusses outlook for 2017; says investors should go west or east for equities and bonds. @rapplerdotcom pic.twitter.com/lv0yjnJaZM

— Chrisee V. Dela Paz (@chriseedelapaz) January 17, 2017

‘Clear policy communication will help’

But in the long term, the HSBC executive thinks foreign investors will focus on the country’s strong economic fundamentals.

Fan added: “[In the] medium term, foreign investments are more driven by the fundamental outlook on the economy. Clear policy communication on how the government will deal with those controversies will help investors address those lingering anxiety.”

She said HSBC forecasts 6.5% economic growth for the Philippines in 2017, backed by strong remittance growth and robust consumption.

HSBC also expects the Philippine peso to be traded at P49.50 against the US dollar by the end of the year. – Rappler.com