MANILA - Fitch Solutions sees higher risk of political instability ahead of the 2022 polls amid the ongoing dispute between factions of the ruling PDP-Laban party, the analytics firm said on Monday.
Policy-making may be affected by "political jostling" at a time when Philippine economic recovery remains weighed down by the COVID-19 pandemic, the company added.
Fitch Solutions said it has slightly lowered its Short-Term Political Risk Index score for the Philippines from 64.8 out of 100 to 64, with a lower score reflecting higher near-term risks of political instability.
“We at Fitch Solutions view the infighting within the Philippines’ governing PDP-Laban party ahead of 2022 elections as detrimental to the country’s near-term policy-making outlook,” the company said.
Fitch said it lowered its policy-continuity score and warned that delays to the passing of the 2022 budget could prompt it to further lower its score.
Policymaking could be disrupted at a time when the Philippine economy remains hampered by COVID-19, Fitch said. Political distractions and infighting within the governing coalition could hamper efforts to reopen and support the economy.
“The confusion over the easing of containment measures in Metro Manila on Sept. 8, highlights the uncertainty facing the economy in the near term,” it added.
Politics may shift away from the need to boost the Philippines’ vaccine uptake rates and address supply issues, Fitch said.
"Longer-term reforms that would benefit the next president could also stall."
Philippine economic managers are pushing for amendments to several investment laws in a bid to attract more foreign capital into the country.
But Fitch said the proposed reforms to ease restrictions on foreign ownership in the utilities and retail sectors, as well domestic hiring requirements, may be hampered by political jostling.
The company earlier lowered its growth forecast for the Philippines to 4.2 percent from an earlier outlook of 5.3 percent saying the country continues to struggle amid new COVID-19 outbreaks.
Fitch Ratings, which assigns credit ratings for the country, also revised its outlook on the Philippines to negative from stable saying the country's fiscal finances weakened as a result of the pandemic.