NEDA chief on transition to Marcos presidency: Lay out economic agenda to ease investors concerns

The camp of leading presidential candidate Ferdinand Marcos Jr. should outline its plans on how to manage the economy to address uncertainties as the country shifts to a new regime, the Philippines’ chief economist said Thursday.

At a press conference on the first quarter 2022 gross domestic product,   Socioeconomic Planning Secretary and National Economic and Development Authority (NEDA) chief Karl Kendrick Chua said that “any change, of course, will create concerns.”

In an emailed commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that investors have taken a “wait-and-see attitude” while waiting for details of the incoming president’s policies or reforms in his first 100 days in office as well as who will be the members of the new economic team.

On the first trading day following the May 9 polls, Philippine shares declined with more foreign investors pulling out funds due to the decline in regional markets and the release of unofficial results of the national elections indicating a victory for Marcos Jr., the only son and namesake of the late dictator. 

Likewise, according to news reports, American investment giant JP Morgan advised its clients to lessen exposure to local stocks as it downgraded the Philippines to the bottom of its ASEAN portfolio. The camp of Marcos Jr., however, said JP Morgan’s report had been taken out of context. 

“I think the best way to address these concerns as what other analysts and investors have mentioned is for the new administration to lay out its [economic] agenda so that people will understand better [that] will alleviate any or possible concerns,” Chua said.

Apart from continuing the Duterte administration’s Build, Build, Build program with a focus on digital infrastructure and bringing down rice prices at the retail level to P20 per kilo, Marcos has not detailed yet how he plans to manage the economy especially with trillions of debt that his administration would inherit from the Duterte administration.

As of end-March 2022, the national government’s running debt balanced widened further to a new record-high of P12.68 trillion, 4.8% higher than the P12.09 trillion recorded as of end-February 2022 amid continued borrowing efforts to boost the state’s war chest for COVID-19 recovery measures coupled with a weaker local currency during the period. 

Tax reforms; Build, Build, Build

The NEDA chief said the next administration shall “have to seriously think about the next set of tax reforms” to fund its programs, especially if it plans to continue the Build, Build, Build infrastructure initiative.

Out of the 119 infrastructure flagship projects (IFP) under the Build, Build, Build program, only 12 were completed to date and additional seven will be completed by June — the last month of the Duterte administration — while 12 more are set to be completed by December 2022. 

This means a total of 88 IFPs will be up for the next administration to continue under its full-year budgets from 2023 to 2028.

Former Build, Build, Build committee chairperson Anna Mae Lamentillo, however, said the Duterte administration completed 29,264 kilometers of roads, 5,950 bridges, 11,340 flood control projects, 222 evacuation centers, 150,149 classrooms, 214 airport projects, and 451 seaport projects.

Chua, however, said the next administration “shall live within it means” to ensure “macro-fiscal prudence.”

“Raise tax revenues if needed to fund important investment in infrastructure and human capital development,” he said.

Transition plan

NEDA’s Chua said that his team stands ready “to have a dialogue with the transition team of the new administration to discuss the details.”

The country’s chief economist said, “Policy continuity is the most important, I think, during this transition.”

He said that the next administration should maintain a responsible and prudent fiscal policy “so that we have resources to help the people [and] address other concerns.”

On policy continuity, Chua said the key reforms enacted under the Duterte administration “such as the comprehensive tax reform; rice tariffication; Build, Build, Build; national ID; universal healthcare; ease of doing business; three liberalization bills that opened the economy to more foreign competition; all of them I believe should be retained not reversed.”

He added that in the immediate term, the next administration must fully reopen face-to-face classes to ensure that economic gains are sustained.

To recall, Chua earlier said opening all 60,743 schools for in-person learning will increase economic activity by P12 billion per week.

“The second is addressing inflation,” he said.

“Medium term, there are four priorities the NEDA is proposing to prioritize. The first is to pursue smarter infrastructure. Second is to improve regional equity on how we allocate budget and resources. Third is to pursue the innovation agenda that is what will make the country grow to become high-income. Fourth, and most importantly, to address climate change,” Chua said.

“Those are the issues that, I think, are important that the NEDA is recommending to the next admin as medium term objectives,” he added. — RSJ, GMA News