Economist says fiscal gains not politics-proof
THE COUNTRY’S recent economic and fiscal gains may not be irreversible or as politics-proof as some optimists hope, an economist from Dutch financial giant ING suggested.
Joey Cuyegkeng, economist at ING Philippines, said in a research note Tuesday that while the country had economic momentum for the next 12 to 18 months, “gains are not totally irreversible.”
The economist was wary of the national election on May 9 which may bring to power “a president who is pressured to deliver on a 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,” he warned.
Cuyegkeng’s analysis ran counter to an earlier analysis by business executive Jaime Augusto Zobel de Ayala, head of the 182-year-old Ayala Corp., who believed the country would continue to grow regardless of who was elected the next president. Ayala, speaking to stockholders, cited global trends that would force economies like the Philippines’ to progress, adding that his group tended to be optimists.
The front-runner in the upcoming presidential elections at the moment is tough-talking Davao City Mayor Rodrigo Duterte, who has been criticized for his gutter language and his strongman tone, particularly with regard to dealing with illegal drugs and criminality. Another front-runner is Sen. Grace Poe, adopted daughter of the late movie kingpin Fernando Poe Jr.
“Credible economic advisers of the candidates especially the front-runners are a source of cautious optimism,” Cuyegkeng said. “But at the end of the day, the president would make the final call and an appreciation of economic and business nuances would be critical,” he added.
While a number of reforms have been instituted and passed into law, the economist said crafting the implementing rules and regulations and execution were just as important.
“Squandering the fiscal gains is possible,” he said.
Cuyegkeng said fiscal spending was expected to remain strong in 2016, noting that more than 60 percent of this year’s projects and programs have already been started.
“Risk to this favorable fiscal fundamental in 2017 and beyond would depend on the next president,” he said.
Nonetheless, Cuyegkeng said political developments in the Philippines have been largely favorable and elections were expected to proceed in a credible and peaceful manner.
On monetary policy, the economist said the Bangko Sentral ng Pilipinas would likely keep policy settings steady in the near term.
The consensus, he said, was for the monetary authority to show a steady policy rate environment for 2016, especially after the failed Doha meeting about freezing oil output. Balancing supply and demand conditions for oil would be challenging for all countries, he added.
Overall, he said Philippine economic growth was expected to improve this year on the back of stronger government spending, private consumption, election spending and fixed capital investments. Inflation, however, could be a problem next year in the absence of an agreement to freeze oil production.
