Will the economy ‘go south’ because of Martial Law?


By: John Carlo Tria

PERHAPS not. While it may be a common response to expect the economy to falter as a result of the Martial Law declaration in Mindanao, the opposite may be true- because our fundamentals remain sound.

If anything, the government’s quick response to take hold of the situation, plus the positive response from Mindanao residents almost endorsing Martial Law may even boost the economy.

According to the Department of Finance, they can withstand adverse effects of the current unrest in Mindanao as traders favored the Philippines, evident in the rise of the local bourse and the strengthening of the peso against the dollar.

Two days after the Martial Law declaration, the Philippine Stock Exchange index (PSEi) added 33.83 points or 0.42 percent to close at 7,871.65, while the peso ended stronger against the US dollar at P49.83 from P49.995 in the previous day.

Peso appreciation helps temper increases in oil prices. A buoyant stock market also means that contrary to the fears of a significant few, there is no capital flight, or the exit of money from the country.

Explaining these and other fundamentals in a statement, National Treasurer Rosalia De Leon said that ample buffers positioned the country to weather changes in global environment, as the nation’s external debt-to-gross domestic product (GDP) at 24.5 percent is one of the lowest in the region.

She also said that the country has a current account surplus since 2003, while its net foreign direct investments (FDI) at $7.933 billion in 2016, which is higher by 41 percent year-on-year. At the end of the PNOY years, we barely made P6 billion in FDIs.

The Philippines also has healthy level of international reserves at $81.8 billion, enough to cover 9 months of imports.

Further, De Leon said the government’s fiscal position remained strong and is well managed with only 2.3 percent deficit-to-GDP as end-March this year, while its debt-to-GDP ratio stood at 41.9 percent. Moreover, our share of foreign debt to total debt is declining.

Are these numbers felt on the ground? A week into Martial Law, a major Japanese retail chain opened in Davao to long lines of shoppers, while the stock subscription of Cebu-based realty firm Cebu Landmasters went beyond expectations.

These two outcomes bucked expectations and paint a picture of a vibrant economy.

The heightened security and governmental response shows that how a situation is handled means so much more than the situation itself, sustaining confidence in the economy and preventing capital flight.

As long as inflation remains within target range and our GDP stays above 6%, we will be ok, and will keep growing.

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