Ferdinand Bongbong Marcos Jr. –Illustration by Ed Lustan
MANILA, Philippines — With a campaign lacking in details on how the perceived winner in the May 9 polls intends to manage the economy, the private sector has shifted to a wait-and-see mode until former Sen. Ferdinand Marcos Jr. outlines his plans and names his economic team.
Investors are eagerly awaiting the lineup of the next administration’s Cabinet as they evaluate the prospects under a new leadership, considering the big challenges such as rising inflation and a mountain of debt to the country’s recovery from a pandemic-induced recession.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said in a commentary that some investors have adopted a wait-and-see attitude “as a matter of prudence” and while waiting for details in the coming days and weeks.
Economic team
Ricafort said that, in particular, investors wanted to have an idea of the incoming administration’s policies for the first 100 days, particularly the members of the Cabinet.
Among the factors that investors are looking at as key to success for the new president is a credible and competent economic team, as has been seen in the past two decades, the economist said.
ING senior Philippine economist Nicholas Antonio Mapa said they were hoping the incoming administration would shed light on its plans to grow the economy while facing inflationary pressures after two years of the COVID-19 pandemic.
Other factors are policies that promote ESG or environment, society and governance, to help attract more investments; efforts to strengthen institutions and the rule of law; a more effective response to the COVID-19 pandemic, and continuation of economic and fiscal reforms.
Ricafort said investors were looking at whether the new administration would focus on economic recovery measures from the pandemic such as the reopening of the economy and creation of more jobs.
On the domestic front, a key to success is whether the new president would promote greater inclusion and unity among politicians—considering that strong support from lawmakers is needed to pass more reform measures that need legislation.
Transition talks
On Tuesday, Finance Secretary Carlos Dominguez III said transition talks between the outgoing Duterte and incoming Marcos Jr. administrations have started, just a day after the presidential elections.
“The briefing has begun,” said Dominguez, President Duterte’s chief economic manager. “So far, so good,” was his reply when asked how the talks were progressing.
Dominguez declined to identify who composed the economic team of Marcos Jr., who will assume the presidency on July 1 once proclaimed winner. “Let’s await their disclosure,” Dominguez added.
The Philippine Chamber of Commerce and Industry (PCCI), the country’s biggest business group, on Tuesday also said the people should give the next administration time to draw up and share its plans.
“The president-elect (Marcos Jr.) will be faced with the same financial challenges due to the prolonged COVID-19 pandemic and lately the geopolitical storm in Ukraine similar to other countries [particularly in relation to] debt and inflation issues,” PCCI president George Barcelon said.
“But we know better [that] our macroeconomic fundamentals are intact [along with] the economic reforms of President Duterte’s administration. Kudos to Finance Secretary Sonny Dominguez, who provided a sound takeoff point for [the] new administration,” added Barcelon, who described the election as “generally peaceful and credible.”
The Joint Foreign Chambers of the Philippines (JFC) said in a statement on Tuesday that they would work with the incoming government to keep the country’s economic recovery on track.
The JFC, with more than 3,000 member companies, is a coalition of the American, Australian-New Zealand, Canadian, European, Japanese, Korean chambers and regional operating headquarters.
Stocks down, T-bill rates up
“As business chambers, we hope to continue to work closely with government officials at all levels throughout the country for the recovery from the pandemic,” they said.
The performance of local financial markets a day after the elections has already indicated the economic challenges that lie ahead.
Interest rates sought by local creditors on short-term government borrowings rose on Tuesday as the domestic debt market remained jittery about high inflation, which think tank Moody’s Analytics last Monday said would be a “headache” for the next administration.
The Bureau of the Treasury (BTr) was able to borrow only P5 billion out of the P15 billion it wanted to raise from short-dated bills.
“The surge in April inflation continues to dampen market sentiment,” National Treasurer Rosalia de Leon told reporters after the Treasury’s first fund-raising after the May 9 elections.
Inflation
Last month, headline inflation—or the rate of increase in prices of basic commodities and services—surged to a 40-month high of 4.9 percent above the Bangko Sentral ng Pilipinas’ 2-4 percent target range of manageable price hikes—due to expensive food and fuel.
During Tuesday’s auction, only the shortest 91-day bills was fully awarded with P5 billion in borrowings.
The average rate slapped on the 91-day bills increased to 1.531 percent on Tuesday from 1.272 percent last week.
The Treasury rejected bids for the two longer maturities as accepting them would have pushed their average rates above 2 percent.
US financial services giant J.P. Morgan also dropped the Philippines to the bottom of an investment pile comprised of its Southeast Asian peers, flagging rising risks from high public debt and surging inflation-factors that it said would slow economic growth and hurt corporate profits..
The Philippines was thus ranked behind Vietnam, Singapore, Thailand and Malaysia in J.P. Morgan’s “new order of preference in Asean.”
In a May 9 report, J.P. Morgan also advised investors to lessen their exposure in local stocks given its view to “downgrade the Philippines to underweight.”
As the market reopened on May 10 after the elections, the benchmark Philippine Stock Exchange Index (PSEi) plummeted by as much as 3.14 percent before paring losses to end the session down by 0.58 percent.
The decline erased about P142 billion in market value on Tuesday, PSE data showed.
It came amid a selloff in regional and US equities as investors worried about rising economic recession risks as central banks around the world move to cool red-hot inflation.
—WITH REPORTS FROM BEN O. DE VERA AND MIGUEL R. CAMUS
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