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Sunday, May 19, 2024

Can the economy recover?

“We think it is crucial for the incoming administration to already constitute its economic team.”

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The incoming administration will have its hands full addressing what appears to be dire economic prospects in the post-election period.

For one thing, the benchmark Philippine Stock Exchange Index (PSEi) plunged over 150 points less than a week after the May 9 polls, indicating that investors were still waiting for the post-pandemic economic program of president-elect Ferdinand Marcos Jr.

The PSEi fell 2.34 percent, or 153.13 points, to 6,379.17 even as most regional indices bounced higher ahead of the weekend. Weekly losses for the PSEi reached 5.6 percent even after the government announced that the economy’s reopening pushed up first quarter gross domestic product by 8.3 percent.

Then there’s the latest report by American financial services giant J.P. Morgan, downgrading the Philippines to “underweight” and placing it at the bottom of an investment preference list due to “myriad” challenges facing the economy, including twin deficits, higher inflation, slower government spending in the quarters after the election, high public debt, risk of a valuation derating and potential earnings growth disappointment. It warned that surging inflation would slow down economic growth and hurt corporate profits. Its “new order of preference in Asean” ranked the Philippines behind close neighbors Vietnam, Singapore, Thailand and Malaysia. Not good at all.

For his part, ING senior Philippine economist Nicholas Antonio Mapa said they were hoping the incoming administration would shed light on plans to grow the economy while facing inflationary pressures in the post-pandemic period.

He also pointed to growing debts on the government’s balance sheet—now equivalent to over 60 percent of gross domestic product from about 40 percent when President Rodrigo Duterte assumed power six years ago: “The 2022 Philippine economy that [Marcos] is inheriting is not the same as the 2016 Philippine economy that Duterte inherited…There have been reforms in terms of legislation but the macroeconomic story is not as rosy as it was.”

From another direction, there’s Albay Rep. Edcel Lagman who said the incoming administration may not have the funds it will need for priority projects, because the outgoing Duterte administration has already disbursed 90 percent of this year’s budget although it is still the first half of the year.

The lawmaker pointed out that unlike the Bayanihan laws signed by President Rodrigo Duterte in 2020, there is “nothing more” to be realigned in the 2022 national budget.

“Unless the new administration can find or create fresh funds, the ‘stimulus package,’ monikered as ‘Bayan Bangon Muli (BBM),’ will be mere sloganeering and simply a change in nomenclature from the original Bayanihan,” he pointed out.

By releasing 90 percent of the budget, the Duterte administration is assured that its projects will continue, at least for this year, but it also deprives the incoming administration of cash it might need over the next six months. Lagman added that while there may be special-purpose funds, they are “untouchable as they are for mandatories, like salaries, pensions and for the National Disaster Risk Reduction and Management Council Fund or the calamity fund.”

Amid all this, we think it is crucial for the incoming administration to already constitute its economic team.

An auspicious start has been the designation of Arsenio Balisacan as Economic Planning Secretary and Director-General of the National Economic and Development Authority (NEDA), a post he held during the Noynoy Aquino administration. As NEDA chief, he will be the board chair of the Philippine Institute for Development Studies, a state-backed think tank, and also chair of the Philippine Statistics Authority.

Balisacan previously served as dean of the UP School of Economics years after he joined the UP faculty in 1987. He was also a director and chief executive of the Southeast Asian Regional Centre for Graduate Study and Research in Agriculture.

From 2000 to 2001, Balisacan briefly served as undersecretary for policy and planning at the Department of Agriculture. At the time, he was the country’s chief negotiator in the Agriculture Negotiations of the World Trade Organization.

The new NEDA chief’s last appointment was as the first chief of the country’s antitrust watchdog, the Philippine Competition Commission, under the Duterte administration.

That’s not all. Balisacan has authored and co-edited seven books and published, both locally and internationally, close to 100 academic papers and book chapters on various development issues, particularly on the Philippines and East Asia.

Marcos Jr. has described Balisacan as an “old friend” with whom he worked with when he was still the Ilocos Norte governor in the early 1980s. “His policies will be for the betterment of our country,” the president-elect added. This, we think, offers a ray of hope that the economy faces better prospects in the post-Duterte era.



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