“In fairness to Duterte, in the two years he has been in office he freely allowed his administration’s economic managers to have a direct hand on the economy.”
While he has not become a “disaster” yet to the economy he is sworn to bring to greater heights, a London-based economic research firm says, as published in one of the national dailies, President Rodrigo Duterte’s “erratic, crass” behavior may eventually bring about such disaster to the detriment of the burgeoning economy.
In fairness to Duterte, in the two years he has been in office he freely allowed his administration’s economic managers to have a direct hand on the economy. He just set the direction of his administration’s economic road map, then gave his economic team the widest latitude in formulating plans, policies and programs on how to realize his vision.
Apparently, this leadership style Duterte adopted in dealing with his economic team must be the attributable factor why despite the many controversies he had brought upon himself and his administration the country’s economy is not far behind from its targets.
In its study, the London-based economic research firm Capital Economics has noted that the country’s economic “growth has remained strong, while economic policy has been left in the hands of technocrats, who have pushed through a number of sensible reforms.”
There are two significant achievements of the Duterte administration so far, as pointed out by the prestigious economic research firm. These are its ambitious “Build, Build, Build” infrastructure program and the comprehensive tax reform program. The first package of the tax reform program is the Tax Reform for Acceleration and Inclusion Act known as the TRAIN Law that took effect January this year.
While these twin programs of the Duterte administration are still making a headway in pump priming the economy, Capital Economics listed other notable accomplishments posted by the country’s economy. It noted the gross domestic product grew by 6.8 percent in the first quarter of the current year. Though this is below the 7-8 percent target for 2018, still it is one of the region’s fastest expansions.
Capital Economics further noted the spending on infrastructure is expected to hit 5.3 percent of the Gross Domestic Product (GDP) this year and more than 7 percent by 2022 which is up from 4.1 percent in 2016. It was further observed that for the administration to hit its target while keeping the perennial budget deficit within the 3-percent-to-GDP ceiling, it needs more revenue, a concern being addressed by the TRAIN Law.
But this tax reform package has its downside too. The TRAIN Law inarguably caused the current spiral of inflation to unexpected levels. Since its implementation last January, the inflation now stands at a seven-year high level.
The ambitious infrastructure program, on the other hand, led to a surge in imports of capital goods contributing to the sharp deterioration in the country’s current account position and put the currency under downward pressure, the economic research firm said.
Remember the country up to this point still doesn’t have an integrated steel mill. The steel requirement of the massive “Build, Build, Build” infrastructure program and other projects of the government are sourced abroad. Add to this the steel requirement of all the vertical projects of the private sector.
The current runaway nosedive in the value of the peso against the US dollar traces its roots to the combined results of this economic development. While this is predictable, managing its negative impact on the economy is a real challenge for it involves many external factors beyond the control of our economic managers.
It is because of the economy’s fragile nature where presidential sobriety is most needed. In this regard, President Duterte is expected to be circumspect so that his doting daughter, Davao City Mayor Sara Duterte, does not need to issue a public statement for the people not to give much attention to her father’s public pronouncements that have nothing to do with his being president of the country.
There is no need as well for us to emphasize the idea that Duterte should be conscious about this because presidential statements are always expected to be edifying. (firstname.lastname@example.org; email@example.com)