PH has ‘elevated’ risk with ‘deteriorating’ outlook for businesses — think tank

MANILA — The Philippines has an “elevated” risk with a “deteriorating” outlook for businesses, a think tank said on Thursday.

WR Advisory Group President and CEO Robin Garcia presented the think tank’s Political and Country Outlook Report for the second quarter of the year, in which it showed that the Philippines scored 10.375 out of 25.

WR Advisory Group assessed the country risk using three pillars: governance, macro and external, and operating environment. The pillars have eight subcategories: political stability, institutional integrity, policy and regulatory risk, fiscal and sovereign risk, external and geopolitical risk, social and labor risk, economic growth risk, and security risk.

Based on the report, fiscal and sovereign risk was determined to be “high,” while security risk was “low.” The rest of the subcategories have an “elevated” risk.

According to Garcia, elite cohesion leads to a more stable policy direction. He noted that Vice President Sara Duterte is “not in tune” with President Ferdinand Marcos Jr. Garcia also pointed out the leadership changes in the Senate and the House of Representatives.

“All of these things indicate some level of instability,” he said.

Garcia said the Philippines has entered a period of low trust in institutions due to corruption.

“There’s not a lot of confidence in institutions currently. There are accountability issues as well,” he said.

The outlook for political stability is “deteriorating,” while it is “stable” for institutional integrity.

The “elevated” score for policy and regulatory risk, Garcia said, is caused by unpredictability and regulatory and policy direction. He stressed the changes in the Cabinet and government departments.

“That’s not necessarily good for the industry they’re regulating,” he said. “If you change the leadership very often… that’s a problem when it comes to stability and policy diversions.”

Moreover, Garcia emphasized the importance of collecting taxes to generate revenues.

“Collection is important from a fiscal perspective because it enables us to invest in other things,” he said.

The outlooks for both policy and regulatory risk and fiscal and sovereign risk are “deteriorating.”

The WR Advisory Group noted the continuing Chinese incursions in the West Philippine Sea, but it noted that the “biggest” risk is the US-China rivalry.

“[US President Donald] Trump and [Chinese President] Xi Jinping are both very strong leaders. They would have to balance conflicts properly, moving forward,” Garcia said.

Meanwhile, the social and labor issues include low wages and lack of benefits.

“Organized labor, even transport groups who are also affected, have been organizing, have been mobilizing in the past few months,” said Garcia.

The outlooks for external and geopolitical risk and social and labor risk are both “stable.”

For economic growth, Garcia said foreign direct investment is not as high. He added that there is a possibility of “stagflation,” which he described as “A period of stagnation where you see very high unemployment and [very] high inflation.”

On the other hand, Garcia said that internal security risk — which includes communist insurgency — has shifted towards external security risk.

“We don’t necessarily see this [security] to be a problem in the short run [or] even in the long run,” he said.

The outlook for economic growth risk and security risk are “deteriorating” and “stable,” respectively. Garcia advised firms operating in the Philippines to look into the report and how the risks may affect their industry. He said there has to be additional contingency in the planning, as things may change in the next few months.