The incoming administration under President-elect Rodrigo R. Duterte may not be as fortunate as its predecessor, as the likelihood of another recession looms in the years ahead, according to latest macroeconomic readings by the Bank of the Philippine Islands (BPI).
Emilio S Neri Jr., lead economist at BPI, believes the external environment during the term of incoming President Duterte should prove volatile, based on global economic trends. The probability of recession in the United States in 2017 has increased significantly, according to Neri.
“Even the likes of China and Europe are facing challenges that are much difficult [compared to] the last three years,” Neri said.
He noted President Aquino was chief executive shortly after the 2008 global financial crisis that the Philippines managed to overcome with resilience, a feat that may not be repeated under Duterte.
The economist also said it may be better for the central bank to begin buying more dollars and boost its foreign-currency reserves now, while it can and establish a cushion for when the economic hardships come at some point forward. Neri expressed a degree of reservation over a planned series of public-sector deficits that may widen further than intended, where government spending and revenue dynamics lead to episodes of market volatility.
Spending on key infrastructures, being one of the targeted priorities of development in the country, lead to certain lag, with the revenue and economic activity that tags along with it, coming in one to two years after the construction is completed, according to Neri.
Still, he said the upside is the deficit spending will generate local employment and help provide alternate solutions for the country’s critical lack of public infrastructures.
He also said the key players in the country’s growth narrative for the next six years will include the governor of the Bangko Sentral ng Pilipinas (BSP) and the secretaries of the departments of Trade and Industry and Budget and Management and the Bureau of the Treasury, who all contribute to making sure the country’s fiscal and monetary policies are well-crafted and carefully implemented.
BSP Deputy Governor Diwa C. Guinigundo previously said the $285-billion economy is perfectly capable of delivering 7-percent to 8-percent local output growth measured as the GDP. Equity stocks went up by 5 percent days after the national elections, when Duterte was seen as the surefire victor.
Neri said various analysts and observers have painted an optimistic six-year landscape based on the then-mayor’s track record of enforcing the law. “There are various rules protecting all sectors of society, but they are not executed well. Execution is key. Hindi pwedeng puro analysis-paralysis lang,” Neri said.