By Lawrence Agcaoili (The Philippine Star) | Updated March 14, 2017 - 12:00am
MANILA, Philippines - Investment banking giant Credit Suisse said the decision of the Department of Environment and Natural Resources (DENR) to close 23 mine sites and suspend five others could reduce the country’s export earnings and slow down economic growth.
“We estimate real GDP (gross domestic product) growth could decline by around 0.2 percentage points, while employment could decline by around the same magnitude of 0.3 percentage points,” said Michael Wan, economist at Credit Suisse.
Wan said the production cuts resulting from the closures and suspensions would have a more significant impact on exports and local government’s fiscal balance.
“We estimate that the mining closures and suspensions could reduce exports by around two percent, weighing on the current account over the rest of 2017,” Wan added.
He explained mining revenues also contribute to local government revenues, accounting for around three percent of local government fiscal surpluses as of 2011 based on latest data available from the International Monetary Fund.
Last Feb. 2, DENR Secretary Gina Lopez ordered the closure of 23 of the country’s 41 operational mines and suspended five others for alleged breach of mining regulations.
This was followed by the cancellation of 75 Mineral Production Sharing Agreements still in the pre-operation stage last Feb. 14.
The closure and suspension orders are seen costing 17 affected cities and municipalities in 10 provinces over P821 million in foregone revenues annually.
Credit Suisse warned there could be some longer-term negative impact on foreign direct investments.
“While the first-round economic impact to the Philippines from the mining ban may be manageable, we fear that these mine closures could send a negative message to foreign direct investors and manufacturers about the ease of doing business in the Philippines over the longer term,” Wan said.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed net FDI inflows hit a record level of $7.9 billion last year, 41 percent higher than the $5.64 billion booked in 2015, despite external shocks from the continued normalization of interest rates in the US as well as the decision of UK to leave the European Union.