Sustain spendings, urges economist

As global trade uncertainties and domestic challenges continue to shape the Philippine economy, Jomar Lacson, head of Macroeconomics and Sustainability Research at ATR Asset Management, is calling for urgent reforms to safeguard the country’s long-term growth.

While domestic consumption remains a bright spot, Lacson, in an interview on Straight Talk, Daily Tribune’s online show, warns that policies addressing fiscal deficits, external risks, and global market volatility are critical to ensuring the Philippines can weather the current storm and maintain its economic momentum.

Lacson noted that while the domestic economy remains relatively strong, the external sector is facing significant challenges, particularly with weakened exports. “It’s not just the US; it’s actually other parts like China. So we know China still has many economic challenges,” he said.

He explained that global trade uncertainties, such as the potential for tariff hikes, have contributed to a decline in the country’s export performance, particularly in the electronics sector, which remains a key driver of exports.

Lacson warned that these uncertainties have led to a slowdown in manufacturing and production.

Don’t build too much inventory

“If you’re manufacturing and exporting to the US, and there’s a threat of a tariff hike, you don’t want to build up too much inventory ahead of that. You have to make sure that you keep inventory moderate so that if the tariff does come, you don’t have too much of a problem with being overstocked,” he explained.

This cautious approach has affected production levels, creating a ripple effect throughout the export sector, he notes.

Despite these challenges, Lacson expressed optimism about domestic consumption in the Philippines, which continues to serve as a pillar for economic growth.

“The good thing for us, I think, is we have a very strong domestic sector for consumption. And I think that’s what investors tend to realize,” he said.

On the fiscal front, Lacson acknowledged the country’s fiscal and trade deficits, highlighting the importance of policy changes to address these issues.

“We have a fast-trade deficit and we have a fiscal deficit. So any regulation, any new regulation that can help us increase our revenues and bring down our fiscal deficit, or at least ensure the, maybe even the auxiliary so we have a specific target to anybody for our deficit to GDP, so if we can bring it down faster actually that helps the markets,” he said.

Manage interest payments

Lacson also weighed in on the government’s recent borrowing, noting that while the country is on track to meet fiscal targets, managing interest payments remains a significant concern.

“One of the reasons why our deficit has been high is because of interest costs,” he explained. With the country’s previous borrowings during the pandemic now due for repayment, Lacson emphasized the need to refinance the debt as interest rates decline.