Moody’s keeps Philippine GDP target despite Marawi crisis

MANILA, Philippines – Debt watcher Moody’s Investors Service retained the country’s economic growth forecast for this year, despite the ongoing siege in Marawi City that prompted the declaration of martial law by President Rodrigo Duterte.

Christian de Guzman, vice president and senior credit officer at Moody’s, said in a commentary titled “Economic Impact of Martial Law Limited But Could Pose Challenge to Rule of Law” that the debt watcher has maintained its gross domestic product (GDP) growth forecast of 6.5% for 2017.

“We expect the impact on economic activity from the crisis in Marawi to be minimal and short-lived… We have maintained our forecast for real GDP growth in the Philippines at 6.5% for 2017,” De Guzman said.

Last May 23, Duterte issued Proclamation No. 216 declaring a state of martial law and suspending the privilege of the writ of habeas corpus in the entire Mindanao.

De Guzman pointed out that the ongoing siege and imposition of martial law would not materially impact the country’s robust near-term economic outlook.

“However, although unlikely to happen, potential challenges to the constitutional system of checks and balances could arrest or reverse the improvements in the rule of law over the past few years,” he warned.

Defense Secretary Delfin Lorenzana is so far sticking to his self-imposed deadline to resolve the Marawi crisis by Friday, June 2.

But the Armed Forces of the Philippines (AFP) has said that martial law may continue even after the Marawi crisis is resolved, as government forces still have to quell other threats in Mindanao.

The 1987 Constitution states martial law must not exceed 60 days and any extension must be approved by Congress.

Mindanao has about 24% of the Philippine population and accounted for 15% of GDP last year, but contributed less than one percentage point to the country’s real GDP growth.

The country’s GDP growth accelerated to 6.9% last year from 5.9% in 2015 as election-related spending boosted private consumption and led to more investments.

Impact of Marawi siege

This year, economic managers expect GDP expansion of 6.5% to 7.5%. (READ: ‘Normal working day’ for businesses amid martial law in Mindanao)

De Guzman explained the fighting has so far been contained to Marawi City, located in the Autonomous Region in Muslim Mindanao (ARMM), which accounts for only 0.7% of GDP.

However, beyond the immediate implications of the crisis in Marawi, the President has also raised concerns over his remarks that he would ignore Congress and the Supreme Court when it comes to martial law. Malacañang has since clarified Duterte will not dismiss constitutional safeguards.

Even before the President actually declared martial law in Mindanao, he had already brought it up repeatedly in various speeches. (READ: Martial law in Mindanao: Duterte’s warning fulfilled)

But De Guzman said it is unlikely recent developments in Mindanao would lead to changes in economic and fiscal policies, which continue to be anchored by Duterte’s well-articulated 10-point socioeconomic development agenda.

Moody’s has placed the credit rating of the Philippines at Baa2 or a notch above minimum investment grade on a stable outlook. – Rappler.com