Policy continuity seen as Marcos admin inherits be er economy, infrastructure

The administration of President Ferdinand Marcos Jr. is inheriting a potentially bigger and stronger economy owing to a better state of infrastructure, as the Philippines continues to bounce back from the pandemic-induced recession.

Incoming Finance Secretary Benjamin Diokno said that the prospects for the Philippine economy are bright because of the solid reform momentum under the Duterte administration.

The Philippines slipped into recession after its gross domestic product (GDP) shrank by 9.6 percent in 2020, as the economy stalled due to strict COVID-19 quarantine and lockdown protocols.

With the further reopening of the economy, the Cabinetlevel Development Budget Coordination Committee (DBCC) penned a faster GDP expansion of seven to eight percent this year after the country exited the pandemic-induced recession with a 5.7 percent growth last year.

The momentum was sustained as the GDP expanded by 8.3 percent in the first quarter of the year despite the strict lockdown measures. The National Capital Region (NCR) and nearby provinces reverted to Alert Level 3 in January as COVID-19 infections hit daily records due to the highly transmissible Omicron variant.

The NCR and nearby areas gradually shifted to Alert Level 1 in March as cases declined sharply as the government ramped up the rollout of vaccines and booster shots.

“We expect growth to be even faster in the second quarter,” Diokno said.

Outgoing President Duterte passed three landmark laws including the amended Retail Trade Liberalization Act, Foreign Investments Act, and Public Services Act to further open up the Philippines to foreign investors.

“Now, in the last two years, the Philippine government did not sit idly by and wait for the COVID-19 virus to recede. Instead, it pursued game changing reforms to stimulate the economy, generate more jobs, improve basic services for consumers, and allow for the exchange of skills and technology with foreign partners,” he added.

IMF SHARES OPTIMISM OF THE PHL ECONOMY’S PROSPECTS

Multilateral lender International Monetary Fund (IMF) upgraded the GDP growth forecast for the Philippines to 6.5 percent from 6.3 percent for this year even as it downgraded the growth forecast for the whole world based on the April 2022 World Economic Outlook (WEO).

“The IMF shared our optimism of the Philippine economy’s prospects,” Diokno said.

Likewise, the outgoing BSP chief said the incoming administration is doubling down on the country’s efforts to attain a much coveted A rating from credit rating agencies that was derailed by the COVID-19 pandemic.

“Before the pandemic, the Philippines was on its way to an A-level credit rating.

The virus set us back temporarily but the Philippine economy remains strong, and the government has sustained the reform momentum,” Diokno said.

Despite the sea of downgrades, Diokno pointed out that S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings affirmed the investment grade rating of the Philippines.

“As Finance Secretary under the incoming administration, I will make the attainment of an A-level credit rating as one of the goals of the economic team. This can be done by improving tax administration and adopting a fiscal consolidation framework, among others,” Diokno said.

GOLDEN AGE OF INFRASTRUCTURE

The outgoing governor of the Bangko Sentral ng Pilipinas (BSP) dubbed the six-year term of President Duterte as the “Philippines’ Golden Age of Infrastructure.”

Diokno said infrastructure spending as percent of GDP averaged five percent from 2016 to 2021, higher than the 2.5 percent average between 2010 and 2015 as well as the 1.5 percent average from 2001 to 2009.

“Over the last six years, the Philippine government invested massively in infrastructure. The goal was to make up for past neglect and reverse the underinvestment in infrastructure,” Diokno said.

According to Diokno, the incoming administration is inheriting a better state of infrastructure to aid its development agenda.

Diokno pointed out that a total of 88 infrastructure flagship projects for completion in 2023 and beyond would be up for the next administration to continue.

More than half of the funding at 57.5 percent or $55.7 billion would be sourced from official development assistance (ODA) that offer favorable financing terms, followed by unsolicited proposals under the public-private partnership (PPP) program with a share of 29.8 percent or $28.9 billion, and the General Appropriations Act (GAA) with 4.7 percent or $4.5 billion.

SMOOTH TRANSITION

As the incoming secretary of the Department of Finance (DOF), Diokno assured that the transition would be smooth as the incoming administration pledges continuity of key reforms that the outgoing administration started.

“With a resounding vote of confidence, the new administration will continue to work for reforms that will further help the country achieve its long-term development objectives,” Diokno said.

According to Diokno, the country’s economic fundamentals remain sound and solid after bouncing back from the impact of the global health pandemic.

“Many are keeping an eye on the Philippines as it undergoes several transitions from COVID-19 recovery to the handover of leadership,” Diokno said.