Yu: Phl economy “still looking up”

CEBU, Philippines — Just as the Duterte administration has marked its second year, various economic issues took the spotlight recently, with the President himself saying the "economy is in the doldrums."

How has his administration actually affected the economy in general and the financial markets in the last 12 months?

For Mandaue Chamber of Commerce and Industry president Steven Yu, the Philippine economy is "still looking up" in terms of growth prospects amid prevalent economic issues ranging from rising inflation, weakening peso, to the fall in financial markets.

"The Duterte Administration has performed well in the past two years and has gained more than a passing mark. I would say that the Philippine economy has very solid fundamentals from all aspects," Yu told The FREEMAN in a phone interview.

"If we look at the metrics such as revenue increase, deficit gap, 8-month worth of GIR (gross international reserves), and debt ratio, among others, it all seems to indicate a great economy that is just marred by external developments," he pointed out.

Yu is referring to the high crude prices, trade war between the US and China, and rising Fed rates, among others.

"Even with high inflation of 4 percent-5 percent and a weaker peso, our economy can easily weather and rise above these developments relatively unscathed. Unless a major, major external shock comes around, there is nothing to worry about. Our real GDP (gross domestic product) growth will continue to increase. Endo will have its effects but will eventually be absorbed by the system, and will not affect the economy in general," the businessman said.

As far as the GDP, which measures the country's economic health, is concerned, the Philippines is doing quite well.

Data showed the Philippines has sustained GDP growth in the previous quarters.

In the first quarter of 2018 the economy grew 6.8 percent, among Asia's fastest growing.

The state's tax collections have also increased 41 percent since the Duterte took office in 2016.

Since June 2016, the government's infrastructure and other capital outlays spending has risen 26 percent.

But some key aspects in the economy have also seemed to show negative implications.

Many have complained of the rising prices of fuel and basic commodities, blamed on the Tax Reform for Acceleration and Inclusion (TRAIN) which took effect starting this year.

The first package of the TRAIN cuts personal income taxes but imposes higher taxes on commodities such as oil and sugar-sweetened beverages.

The Philippine headline inflation is now at a five-year high mainly driven by the new tax law and rising global oil prices.

The rising inflation, which is hurting low-income consumers, pushed monetary authorities to raise borrowing costs for the first time in 2 years.

The Philippine peso also continues to weaken, hovering the P53-level late last month, its weakest in 12 years.

Weighing on the falling peso is fund shifting of foreign investors to the US market which drove the increased demand for dollars and the fast growing imports due to the government's P8-trillion infrastructure program in the next four years.

On the stock market, it's also a downtrend. The benchmark Philippine Stock Exchange index (PSEi) has recently entered the bear market territory after suffering a 20-percent drop from its January peak.

Last May, the President also signed on Labor Day in Cebu City an executive order that will stop illegal contractualization in the country.

Duterte had vowed to stop the hiring of workers in a contractual basis.

This allows companies to avoid paying benefits their regular workers.

In fact, the government had ordered big companies such as PLDT and Jollibee to regularize thousands of their workers.

It was also a good relief to the business community when Duterte recently signed the Ease of Doing Business Act, which requires government agencies to act on applications within 3 days for simple transactions, 7 days for complex ones and 20 days for the highly technical.

"The President has made great strides in his economic policy decisions. From an economic perspective, we are still very much 'play' and things are looking up," MCCI's Yu said.

Despite the short-term volatility in the stock and foreign exchange markets, the country's growth momentum looks intact as fundamentals remains robust and that long-term prospects for the economy seem to be positive.