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COVID crisis, elections may derail Duterte’s reform agenda

The Duterte administration may run out of time to pursue its key reform measures. — PHILIPPINE STAR/MICHAEL VARCAS

THE coronavirus crisis and lawmakers’ preparations for the 2022 national elections could hamper efforts to legislate reforms to boost the Philippine investment climate, Moody’s Investors Service said.

“The combination of the coronavirus pandemic and the forthcoming election cycle possibly exerts an opportunity cost with regards to the implementation of further reform that would build on recent gains in improving the investment climate, promoting investment and assisting in fiscal consolidation,” Christian de Guzman, senior vice-president of Sovereign Risk Group at Moody’s said in a recent e-mail.

“As the 2022 general election draws closer, the government window of opportunity to pursue its legislative agenda is shortened,” Mr. De Guzman said.

A reconciled version of the proposed Corporate Recovery and Tax Incentives for Enterprises Act will be up for ratification in Congress this week. The measure will lower the corporate income tax to 25% from 30% and will streamline fiscal incentives for businesses.

However, several priority measures have yet to be approved. The amendments to the Public Service Act and Foreign Investment Act have already been approved at the House of Representatives, but counterpart bills at the Senate are still pending at the committee level.

Meanwhile, amendments to the Retail Trade Liberalization Act were finalized in the House of Representatives but are pending for approval in the second reading at the Senate.

Investors are hoping these measures will liberalize more sectors of the economy, and improve recovery prospects.

Moody’s affirmed the Philippine sovereign rating of Baa2 with a stable outlook in July last year, citing the country’s track record of improving fiscal management.

This year, Moody’s expects the economy to grow by 7%, but sees the Philippines to be a laggard in recovery compared with other Association of Southeast Asian Nations (ASEAN) peers that have better handled the pandemic.

Moody’s projection for 2021 is near the higher end of the government’s 6.5% to 7.5% projection for gross domestic product growth this year.

“Apart from the vaccine rollout, a number of factors could influence the growth outlook for the Philippines,” Mr. De Guzman said.

“Most prominently, these include the risk of a significant resurgence in infections that leads to a return of stricter containment measures, which in turn would depress domestic demand and delay the recovery,” he added.

The Health department on Sunday reported 2,103 coronavirus disease 2019 (COVID-19) infections, bringing the total to 525,618. The Philippines still has the second-highest number of COVID-19 cases in Southeast Asia. — Luz Wendy T. Noble

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