Abstract
The first quarter in 2009 has seen some key movements within the Philippine
defence and security arena.
These include the delivery of 15 T41-B trainer
planes donated by South Korea and continued conflict
with separatist rebel
groups that has resulted in the kidnapping of both international and local
officials.
The rebel group Moro Islamic Liberation Front (MILF) has
reportedly abducted three teachers and
another separatist group, the
Abu-Sayyaf Group (ASG), has kidnapped three officials from the
International Committee of the Red Cross. These recent attacks highlight the
continued conflict between
the government and the rebel group and their
apparent inability to establish successful peace talks.
Recent political
developments have seen President Gloria Macapagal Arroyo successfully fend off
an
impeachment attempt from her opponents. Arroyo was allegedly linked to
kick-backs from a multimillion
dollar telecommunications deal with the
Chinese company ZTE. Despite an overwhelming majority
voting in favour of
Arroyo, it suggests the possibility that 2010 may mark the end of her time in
power.
Furthermore, we caution that any legitimate attempt to extend her
rule could result in protests and
subsequent rioting which could tarnish
the investment environment for foreigners.
Real GDP growth was higher that
expected in Q408, with a 4.5% expansion that surpassed the consensus
forecast of a 3.5-3.8% increase, and the full-year growth for 2008 reached
4.6%. Although this
underscores the resilience of the Philippine economy
during deteriorating economic times, we remain
sceptical when considering
its ability to fend off the unfolding global recession. In view of this, we
retain
our below consensus forecast of 2.8% for 2009.
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