Economists had mixed views on the economic policies unveiled thus far during the new administration’s first 100 days, including the centerpiece 10-point socioeconomic agenda, coupled with concerns on how the President conducts himself as the country’s chief executive.
For Gilberto M. Llanto, president of state-run think-tank Philippine Institute for Development Studies, “based on the various economic policy statements and their continuing focus on reforms, such as the DOF’s tax reform proposal, the outlook looks quite positive.”
So far, “the economy is benefiting from solid fundamentals, while the new government’s policy agenda to bolster infrastructure spending, advance tax reform, reduce red tape and focus on more inclusive and sustainable growth are positive,” said Kevin Sanker, Asia-Pacific associate economist at Washington-based Institute of International Finance.
Anti drug campaign jitters
“However, there has been investor nervousness related to President Duterte’s anti-drug campaign, resort to emergency powers and geo-political pronouncements, as they could become a distraction for the administration going forward. Given global uncertainties and rising competition, it is important that the Duterte administration focuses on implementing its economic program, which would help address investor concerns and boost sentiment,” Sanker said.
For IHS Markit Asia-Pacific chief economist Rajiw Biswas, “a key question for investors is whether the Duterte administration is pursuing economic policies that will maintain such strong growth momentum over the medium term outlook.”
Biswas noted that boosting infrastructure spending was essential for improving industrial competitiveness, as the Philippines has underspent on infrastructure for decades, while other Asean countries such as Singapore, Malaysia and Thailand have developed high quality infrastructure.
“However, despite the economic reforms being planned by President Duterte’s economic ministers, the Philippines has become a focus for global media in relation to death squads and major shifts in foreign policy, which could make foreign investors nervous. While a crackdown on crime is very important to improve the law and order situation, foreign investors are concerned about the lack of judicial process and risks to the democratic system. The Philippines is competing against other Southeast Asian nations that are perceived as more politically stable, such as Indonesia and Vietnam. Therefore, the continuously shifting foreign policies of the Duterte administration may eventually deter foreign investors, who seek a more stable, predictable investment environment when deciding on which country to locate their next large factory or office in East Asia,” according to Biswas.
Economist Euben Paracuelles of Japanese financial giant Nomura has this to say: “The question to ask is whether a sustained pickup in political risk premium could ultimately outweigh the growth prospects. If the economy continues to generate jobs, I think Duterte’s popularity will remain high. And as far as FDIs are concerned, I believe if he maintains the reforms of the previous government and build more infrastructure, I think that should still be supportive of more inflows. Nonetheless, we have to remain cognizant that there are risks around this, particularly if in the next few months we see more of these controversial comments and more importantly, if there are signs of a letup in the implementation of reforms, including the tax reforms which we are keenly watching next.”
No reason for complacency
For Foundation for Economic Freedom (FEF) president Calixto Chikiamco, the country’s strong economic growth is seen sustained on the back of solid fundamentals, but “there should be no reason for complacency.”
“There are a lot of good things that the administration has done in the first hundred days, but in my view, the economy is not moving toward inclusive growth,” Chikiamco said.
For IBON Foundation executive director Jose Enrique A. Africa, the economic policy direction of the Duterte administration has nothing new to offer.
“The economic team’s proposals are largely consistent with the previous administration’s, so could potentially deliver the same kind of exclusionary growth. The proposed ramped-up infrastructure spending in particular is a direct stimulus aside from possibly spurring greater economic activity. But this is at best a short-term boost because the economic team does not have a coherent plan for strengthening domestic demand for the long term,” Africa said.
“The 10-point economic agenda should have given central focus to developing Filipino industry, meaning Filipino firms producing Filipino goods using local agricultural, fisheries and mineral. This is the key to ensuring that jobs and incomes are created at home rather than abroad. Exporting our raw materials and chronically importing the goods we consume support jobs abroad rather than in the national economy,” Africa added.
Also, “agricultural development should have been focused on land reform and farm support to increase rural incomes, expand the domestic market, and create a surplus for reinvestment in national industry” as “a genuinely equitable distribution of land and rural assets is the necessary starting point of rural development,” Africa said.
No plan to ensure inclusiveness
“The economic team also does not have a coherent plan for hard-wiring inclusiveness into the national economy and ensuring that the majority benefits. Growth built on inequitable asset ownership, such as land, and inequitable access to capital and financing will always be exclusionary. Growth that inequitably distributes gains from growth because of low wages and benefits on top of contractualization and job security will also always be exclusionary,” according to Africa.
“A pro-people economic strategy does not have to be disruptive. On the contrary, a clear and coherent declaration that the Duterte administration upholds national industrialization, agrarian reform and rural development, and independent foreign economic policy can go far in setting stable parameters for Philippine economic progress. However, the biggest threat to growth, exclusionary as it is, are the steadily mounting political attacks on the Duterte administration. The country’s economic fundamentals are weak—agriculture is backward, industry is narrow and shallow, poverty is widespread and inequity is structural,” according to Africa.