DBS sees potential in Duterte’s economic game plan

By appointing experienced economic managers and committing to ease foreign restrictions on businesses, the Duterte administration was off to a good start, DBS Bank Ltd. said.

“[President] Duterte’s game plan is positive for the longer-term growth outlook. But delivery is key. Until policies are implemented, it’s all theory,” DBS Group Research economist Gundy Cahyadi said Monday in a report titled “Philippines: Duterte’s game plan.”

Having admitted to a “lack of experience” in running the economy, President Duterte’s decision to appoint experienced technocrats in his economic team was a “wise move,” Cahyadi said.

It also helped “the Duterte team has indicated that they will broadly continue [former President Aquino’s] economic platform with some tweaks,” Cahyadi said.

The economist took note of the Duterte administration’s plans to further liberalize the economy by expanding foreign ownership to 70 percent from the current 40 percent. The President also said he was willing to lease lands for 40 years from the current setup of 25 years.

“This is potentially significant. While foreign direct investment (FDI) increased several fold during Aquino’s term, it remains low compared to the rest of the region. Easing restrictions on foreign ownership is likely to encourage more inflows in the medium-term,” Cahyadi said.

The economist said “infrastructure development takes priority” under the Duterte administration, in line with plans to raise infrastructure spending to 5 percent of the gross domestic product (GDP) from an average of 2.2 percent during the Aquino administration.

To increase expenditures on public goods and services, Duterte’s economic managers was planning to raise the budget deficit ceiling to 3 percent of the GDP, which Cahyadi said was “not necessarily a problem, given the public debt profile.” The share of public debt to the GDP has been on the decline over the past five years.