Duterte administration: An economic prognosis

An analysis

After a rather fast-paced economic growth experienced in the first quarter of the year, boosting the local economy by an amazing growth rate of 6.9 percent, coming off from a 6.3-percent growth in 2015, is it a tell-tale sign of an economy on its way to a tiger status? Does it indicate that the Philippines will achieve a higher economic position that complements investment rating upgrades the past few years?

With the impending changing of the guards in the finance and budget departments upon the assumption into office of President-elect Rodrigo Duterte, it is expected several policies will have to be rehashed, maintained or abrogated depending on their effect to the Duterte economic program.

As of late, local economic gurus predict a moderate increase in our GDP. As expected, the next administration has no other recourse but to initially taper off government spending to take note of the previous regimes fiscal outlay. Recently, inflation rate has escalated to 1.6 percent, the highest in two years. This results in the spiraling cost of commodities equivalent to the same rate; the basic commodities are hardly hit. Such pressure in supply have predominantly been influenced by the upsurge in election spending that started as early as the last quarter of the previous year.

This injection of funds resulted in acceleration of prices; basic goods primarily are effectively uncovered. The incoming economic team of the Duterte administration stands to correct the situation by checking its own fiscal spending and hold on to the situation until such time that situation normalizes. Be that as it may, inflation rate (1.6 percent) by that much is within the economy's tolerable limit, much less a cause for alarm that may lead to extra economic measures to cushion the impact.

Investment spending should take the cue in our drive to sustain the growth prospect in 2016 and beyond. Prospects for infrastructure spending should endure to achieve the targeted growth of 7 to 8 percent. What has been started by the Aquino administration in terms of ground work hopefully can be realized under the term of Duterte. The unabated congestion experience in almost all localities of Metro Manila in terms of vehicular traffic may soon see an easing—something which has eluded city dwellers for an undetermined number of years.

Prospects for infrastructure spending should endure to achieve the targeted growth of 7 to 8 percent.

Euphoria

The economic euphoria purportedly brought about by the next government has not been experienced since the EDSA revolution of 1986. Hopefully, this can be translated to concrete local provisions. The Duterte presidency is expected to have its hands full in its first year amid an animated populace looking forward to radical promises and a turnaround in concerns on safety and security.

As of late, drug-related activities—coincidental or deliberate—have been at the center of police-related operations. The aggressive operations and apprehensions against such felonies should have been done a long time ago. The president-elect's tirade against criminal activity may have brought the flurry of law enforcement efforts and targeting of crime syndicates. Still, it could be a move to lessen the impact of Duterte's antagonism against what he perceives as incompetence and corruption in the police force. 

The president-elect's tirade against criminal activity may have brought the flurry of law enforcement efforts and targeting of crime syndicates.

Employment

It is needless to say that employment should be among the main priorities of Duterte's administration. All claims of economic growth will prove futile unless the government gives due recourse to the country's unemployment problem, which at a high of 6 percent. With a working population of 60 million, there are about 3.6 million Filipinos who are out of jobs, not because it is their choice but because they cannot find one. Long-term growth should be in the horizon with the pro-people priorities of the new administration, taking into account the safety of the environment seems to have taken a backseat in previous administrations.

There are about 3.6 million Filipinos who are out of jobs, not because it is their choice but because they cannot find one.

True to his word, Duterte's pro-people stance is initiated by his marching orders to restructure the incomes taxes, which have proven to be unforgiving, unfair and anti-poor—perhaps even the highest in the ASEAN, if not one of the highest in the world. Clamors been echoed in previous governments, yet were ignored. Officials failed to see that reforming the tax system can have some economic returns.

The growth forecast tapering-off to around 6.5 to 7 percent GDP is conservative considering that infrastructure developments are not yet fully realized until the middle of next year. It is most probable that a status quo may still be in the offing until the third quarter of 2017. By then the economy will have to achieve a galloping growth by at least 7.5 to 8 percent in the next two years.

Emmanuel J. Lopez, Ph.D. is an associate professor at the University of Santo Tomas and the chair of its Department of Economics. Views reflected in this article are his own. For comments email: [email protected]