Moody’s Rules Out Near Term Economic Impact of Martial Law Declaration in Mindanao

Moody’s Investors Service rules out immediate impact of the declaration of martial law in Mindanao on the Philippine economy.

“The ongoing siege and imposition of martial law will not materially impact the country’s robust near-term economic outlook,” the debt rater said in a research note on Wednesday.

It expects the impact of the current situation in Marawi City, Lanao del Sur “to be minimal and short-lived.”

It, on the other hand, noted that “although unlikely to happen, potential challenges to the constitutional system of checks and balances could arrest or reverse the improvements in the rule of law over the past few years.”

President Rodrigo R. Duterte declared martial law in Mindanao last May 23 while he was on a state visit in Russia after clashes between government troopers and members of ISIS-leaning Maute terrorist group erupted in the afternoon of the said day in Marawi City as soldiers targeted arrest of another terror group’s leader Isnilon Hapilon of the Abu Sayyaf Group (ASG).

Authorities, this Wednesday, said only few villages in Marawi City remained under the terror group’s hand.

Moody’s said martial law is limited for 60 days under the present Constitution and since authorities have said that they have taken control of majority of Marawi City any extension of the martial law is not needed.

The President earlier said he was open to declaring martial law to address the problem of illegal drugs, which, on the other hand, did not fall under the definition of “cases of invasion or rebellion.”

However, statements by officials from the Executive department that government will honor the law made Moody’s economists discount the extension of martial rule “beyond the resolution or dissipation of the immediate threat posed by the Marawi crisis.”

With this over-all situation, Moody’s is maintaining its 6.5 percent growth projection for the country this year.

“Along with enhancements to government effectiveness and the control of corruption, the greater policy predictability afforded by better rule of law has underpinned a more favorable environment for economic growth and investment in recent years,” it said.

It explained that “it is unlikely recent developments in Mindanao will lead to changes in economic and fiscal policies, which continue to be anchored by Duterte’s well-articulated 10-point Socioeconomic Development Agenda that seeks to improve revenue generation through tax reform, lift infrastructure spending beyond five percent of GDP, and increase investment in human capital and development, among other measures.”

“However, if recent events lead to prolonged uncertainty around security or governance, such a development would eventually dampen business confidence and, consequently, economic outcomes,” it added. (PNA)