Markets closely watching Duterte’s economic agenda

The revealing of president-elect Rodrigo Duterte government’s economic programs has served its purpose – it is calming financial markets and the business sector as they await the announcement of the incoming economic team.

Global investment bank J.P. Morgan said Duterte’s 8-point economic agenda should “assuage concerns” about the president-elect’s “lack of clarity on his economic platform.”

Duterte throughout the 90-day campaign period has little to say about his economic platform and focused more on security and implementing the rule off law to eliminate rampant crime, drug traficking and corruption within government.

J.P. Morgan in its latest Asia Pacific Equity Research commentary (“President-elect Duterte unveils 8-point economic agenda”) said while Duterte gave broad pronouncements, it is the naming of names and the “who’s who” that is now being anticipated.

“(The) appointment of a capable and experienced cabinet and economic team, and eventually, the ability to execute, are the next milestones to watch for,” said J.P. Morgan.

Still, the US-based investment bank said financial markets appreciate the “explicit commitment of the incoming administration” in keeping the current macro-economic policies and prioritizing infrastructure development.

“The absence of any drastic shifts is encouraging, in our view,” said J.P. Morgan.

“The focus on grassroots development is also laudable, as inclusive growth has been a persistent problem of the economy. It also helps that the new government is cognizant of the need to maintain fiscal discipline despite its goal of making income tax more progressive.”

Duterte’s transition committee through former Agriculture secretary Carlos Dominguez, announced the new government’s economic agenda. The 8-point agenda as summarized and commented on by J.P Morgan are:

•Improve government revenue collection efforts by implementing progressive reforms in the two major revenue collection agencies, BIR and BOC, to reduce corruption and ultimately increase tax effort.

•Accelerate infrastructure spending to address bottlenecks in the government’s ability to increase infrastructure spending, including public-private partnership. The objective is to maintain government infra spending ratio of five percent of GDP.

• Attract foreign direct investment flows. The new administration plans to revisit the economic provisions of the Philippine Constitution, particularly the foreign ownership limit. They also aim to enhance competitiveness by adopting the Davao City’s model where ease of doing business is not an issue, such as new business license issuance at the shortest possible time. Core to this objective is to reduce criminality and improve security for people and business.