Business & Economy

Economist sees close May 9 race

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Davao City Mayor Rodrigo “Digong” Duterte’s rise as the new front-runner in the presidential race indicates how day-to-day public service concerns have resonated more among voters than macro policy themes, an economist from American banking giant Citigroup said.

In an April 13 Citi research note “Duterte’s Rising Star,” Filipino economist Jun Trinidad predicted that the upcoming presidential election on May 9 could be a “close race” with a near “split decision” outcome.

As many political observers now expect an “anti-Duterte” campaign to intensify, Trinidad said voter preferences could still change and benefit any of the key presidential candidates.

“We believe Duterte’s claim that under his presidency, he could effectively solve peace and order issues, illegal drug distribution/addiction, worsening traffic, corruption, etc., with his Davao City performance as evidence, has resonated with many voters,” the economist said.

Frustration with admin

Trinidad pointed out that Duterte’s “low-cost but effective” campaign with such “simple” message continued to appeal to many survey respondents, translating to snowballing support as the nation moves closer to the May 9 elections.

“Growing public frustration with ineffective public services despite President Aquino’s upbeat trust ratings seems to be the key voter issue in this election campaign, much like a strong backlash against corruption catapulted Aquino to the 2010 presidency,” the Citi economist said.

The economist noted that Duterte’s lack of big policy commitments - except his preference for federalism - had apparently not gnawed on the unorthodox mayor’s poll popularity.

Duterte’s election campaign is just peaking at the right time, the research said.

In an earlier research note in December 2015, Trinidad said: “Duterte is widely seen as a ‘clean’ candidate, although his unfiltered language and colorful personal life have elicited concerns among some sectors such as the Catholic Church and women’s organizations. In addition, his support for the use of extrajudicial tactics against suspected criminals in Davao to combat crime has elicited criticisms by human rights groups such as New York-based Human Rights Watch.”


Likewise noted was Duterte’s hardline stance against criminality during his stint as Davao City mayor for over 20 years.

Davao has been among the fastest-growing cities in the Philippines with per capita gross domestic product rising by a compounded annual growth rate of 6.9 percent since 2010.

“Without any clear surge in support levels for any candidate, we may thus see a new President with a relatively weak mandate, unlike the strong majority obtained by President Aquino (2010) or former President [Joseph] Estrada (1998),” Trinidad said.

“That said, governing with a weaker mandate should not be an issue in a centralized presidency. We expect to see the usual coalition of several parties in the House of Representatives supporting the President’s agenda, although increasingly limited room for ‘pork barrel’ type spending may weaken any coalition’s cohesion,” he said.

Voters’ favorite

Duterte emerged as the voters’ favorite in the latest surveys conducted by pollsters Pulse Asia and Social Weather Stations (SWS). In the Pulse Asia survey (March 29 to April 3), Duterte garnered the highest share of support at 30 percent, followed by Sen. Grace Poe (25 percent).

In an SWS survey (March 30-April 2), Duterte obtained a support of 27 percent versus Poe’s 23 percent. “Given the statistical margin of error, his lead could narrow, with the May election outcome a very close vote,” the economist said.

The outgoing Aquino administration, which has espoused good governance reforms and fiscal discipline that allowed the government to obtain investment grade ratings, has tried to frame the upcoming elections as a referendum for continuity or change. However, Mr. Aquino’s anointed successor, Mar Roxas, has fared poorly in election surveys.

Poe had topped surveys for many months previously. But critics continued to question her allegiance to the Philippine flag - as well as lack of experience - even after the Supreme Court had cleared obstacles on citizenship issues.

Vice President Jejomar Binay, the first candidate to declare his presidential bid, continued to grapple with allegations of corruption that he had not bothered to explain except for the usual line that it’s just a political attack.

Relief rallies

On the impact on financial markets, Trinidad said Duterte’s rising star implied that choices were firming up a few weeks before the elections. With election uncertainty waning amid ample liquidity in the financial system, he said there would be buildup to some support rally.

Trinidad noted that the local stock barometer offered the clearest expression of a relief rally in three of the last four Philippine presidential elections - in 1992, 2004 and 2010. He said those relief rallies were perhaps driven by local monies and sustained post-May 2004 and 2010 elections.

Recently, he noted net foreign selling out of the local market in modest amounts despite an index staying firm.

For the peso, he said, a rally against the US dollar was evident post-1992 and 2010 elections.

“Equity and Philippine peso relief rallies were unambiguous during President Aquino’s runaway election victory in 2010 amid global reflation and improving prospects following the 2009 GFC (global financial crisis),” Trinidad said.

“Assuming a smooth electoral process in May and a postelection policy agenda that can inspire private investments in 2017, a relief rally could cushion Philippine peso’s downside risk in second half of 2016 when (US Federal Reserve) Fed rate tightening risk and higher US treasuries take hold.”

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