The economic policy of the next administration could either sustain or break the growth momentum in the next couple of years, an economist of a Dutch bank said Tuesday.
ING Bank senior economist Joey Cuyegkeng said in a report recent reforms and gains would provide a momentum to the economy in the next 12 to 18 months.
“But gains are not totally irreversible. A president who is pressured to deliver on the campaign promise, or a president who lacks the full appreciation of economic and business matters. And if the gains are squandered, then promises of presidential candidates could be a source of major challenges,” Cuyegkeng said.
“A number of reforms have been instituted and passed into law. Crafting implementing rules and regulations and execution are as important. Squandering the fiscal gains is possible. We mentioned the fiscal challenges that the new administration could face. There are a number of promises that have significant fiscal ramifications,” Cuyegkeng said.
Cuyegkeng said presidential candidates were making several promises that could be considered reasonable and compelling.
“We estimate that the impact on the fiscal position costs an equivalent to 3.4 percent of GDP [including the claw back higher consumption]. If implemented [and more so if done simultaneously] then fiscal situation could bring us back to the dire fiscal conditions early last decade when the government was posting a chronic deficit of around 4 percent of GDP and primary balance veers back to a deficit,” he said.
He said credible economic advisers of the candidates, especially the frontrunners, were a source of cautious optimism. However, Cuyegkeng said the president would make the final call and an appreciation of economic and business nuances would be critical.
He said political developments in the Philippines have been largely favorable. He said elections were expected to proceed in a credible and peaceful manner.
“Current government, the market and the business sector believe that the economic reforms and gains during this administration are irreversible. We believe that the recent reforms and gains would provide a momentum to the economy in the next 12 to 18 months,” he said.
Cuyegkeng said fiscal spending was expected to remain strong in 2016. The report of the February fiscal performance is expected this week.
“Indications from the budget department show that the pace of spending should remain high as important government agencies were able to start more than 60 percent of this year’s projects and programs before the election ban on March 25,” Cuyegkeng said.
The government expects the economy to grow between 6.8 percent and 7.8 percent this year, on robust domestic demand.
GDP grew 5.8 percent in 2015, below the target range of 7 percent to 8 percent for the year.
