Pre-election tensions may derail Philippine recovery

MANILA, Philippines — Pre-election tensions may derail policymaking and reforms, further hampering the country’s recovery from the pandemic-induced recession, according to Fitch Solutions Country Risk & Industry Research.

In a commentary titled “Philippines’ Political Jostling Ahead of 2022 Elections A Threat To Policymaking,” Fitch Solutions said it has lowered the Philippines’ short-term political risk index score to 64 out of 100 from 64.8.

“The politicking will likely distract the government from policymaking in the near term and threatens disunity with the government,” it said.

The research arm of the Fitch Group said the ongoing dispute within the governing PDP-Laban party may weaken the prospect of a straightforward contest between the pro-Duterte and anti-Duterte camps for the presidency and vice presidency ahead of the May 2022 elections.

“The PDP-Laban infighting and potential switching of allegiances in the coming months could disrupt policymaking at a time when the Philippine economy remains hampered by COVID-19,” Fitch Solutions said.

Despite the intermittent, as well as longest and strictest lockdown in the world, COVID cases in the Philippines have exceeded two million, with more than 35,000 deaths.

“The confusion over the easing of containment measures in Metro Manila on Sept. 8 highlights the uncertainty facing the economy in the near term. Cases have been surging domestically as the more infectious Delta variant has become prevalent and leading economic readings point to continued economic weakness,” it said.

Fitch Solutions said the Philippines’ Purchasing Managers’ Index (PMI) sank to 46.4 percent in August from 50.4 in July, reflecting a contraction in activity.

Similarly, Google mobility data suggests that retail and recreation, transit and workplace activity remain significantly below pre-pandemic levels. Households are also being squeezed by high inflation, with the consumer price index up 4.9 percent year-on-year in August and food prices rising 6.5 percent.

Fitch noted that prospects for easing social restriction measures remain relatively low due to the Philippines’ low vaccination rate. Only 17.3 percent of the population had received one vaccine dose and 14.6 percent fully vaccinated as of Sept. 8.

“Political distractions and infighting within the governing coalition could hamper efforts to reopen and support the economy. Focus will likely shift away from the need to boost the Philippines’ vaccine uptake rates and address supply issues, while we highlight the potential for delays to the passing of the 2022 budget before year-end,” Fitch Solutions lamented.