So what else is new? Do we really have such short memories on how last years political turmoil took toll on the country and the economy? Are we really prepared to travel down the same bumpy and uncertain road again?
This apparently is true not only for the individual Filipino but also among investors and the business community. Investors do not wait for circumstances to become perfect before making any decision. They anticipate, forecast and decide. In fact, as early as the fourth quarter of last year, we have seen various foreign investment analysts anticipating the political scenario to become noisy once more around this time of the year. However, this has not stopped them from coming up with a more objective and, thankfully, more optimistic outlook on the economy because they know that there is so much more to consider than just politics. And in our situation, politics has apparently become rightly or wrongly the most predictable factor such that they have now learned to look past this. In other words, regardless of the motives or objectives behind todays political noise, local politics has taken the backseat as far as investors are concerned. Everything now boils down to fundamentals.
We are not fans of the Arroyo Administration as far as its political moves are concerned. But we have to give it more than just brownie points on the economic front and what has it been doing on the fiscal scenario. For investors, the overriding concerns are:
Sustainability of economic and earnings growth. On this front, the government seems to be successful in spurring economic growth beyond the anemic levels that we have achieved in the recent past. The NEDA has recently indicated that GDP growth would approach the six-percent level in the second quarter of this year, maintaining the pace set in the first quarter.
Consistency and commitment to meaningful reforms, regardless of their impact on political popularity. This is probably one of the biggest achievements of this administration. In spite of risking popularity, its strict adherence to its reform policies has set the proper environment (i.e. interest and forex stability) for encouraging investments. In fact, they are not concerned if President Arroyos popularity ratings sink to their lowest levels as this would afford her the opportunity to pursue more unpopular but meaningful reforms. The passage and unrelenting implementation of such fiscal reform measures has also enabled the country to post a budget surplus in April and May. The word in the market is that the same trend will continue on as far as the June figures are concerned.
Global developments. Never has this been more apparent than in the last few weeks when we have seen so much volatility in the financial markets arising from fears of interest rate movements in the US. As they say, when the US market sneezes, the whole financial world catches cold. Because of such developments, the global financial and commodities market suffered from so many uncertainties. This spared no one, including the Philippines. In our case, the equities and bond markets suffered losses while the peso came under severe pressure as investors were flocking back to dollar investments. We give credit to our monetary authorities for acting swiftly and brought order and calm in a jittery market. By allowing some leeway for interest rates to rise, they have helped stabilize the peso which was then under severe pressure as investors.
Investors are also monitoring the developments in North Korea and what is in store for the regions security environment. They are also watching the resurgence of terrorist acts in India and if this would spread to other countries.
Beyond these developments, investors are just as keenly interested to know what the government has in mind to mitigate the impact of these developments on the economy given its heavy reliance on imported oil and OFW remittances.
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