The incoming administration will face multiple challenges, but strong fundamentals and a bright macroeconomic outlook “leave room for optimism,” said a briefing convened by President-elect Ferdinand “Bongbong” Marcos Jr. of his designated economic team. .
“We have all heard encouraging statements from the new economic directors led by outgoing governor of Bangko Sentral and new chief financial officer Benjamin Diokno that our new administration will take off from sound economic fundamentals,” Marcos said. sunday.
“It won’t be an easy road, but we are not without the means and the leeway to manage the challenges,” he added.
Among the challenges Marcos will face are the government’s Covid-19 exit strategy, soaring oil prices, accelerating rate of inflation, effects of war in Ukraine and a looming global food crisis.
While Covid-19 dampened the Philippines’ momentum by at least 6% from pre-pandemic annual growth, “we have now rebounded and regained our robust growth trajectory,” Diokno said in a speech at Manila on June 13.
“The International Monetary Fund (IMF) shares the view of the Philippines’ favorable economic outlook relative to its peers. In its latest Global Economic Prospects Report, the IMF projects that the Philippines will post the region this year at 6.5%,” he said.
Better performing neighbors
Diokno said the Philippine economy outperformed its neighbors, growing 8.3% in the first quarter of 2022, overtaking Malaysia, Indonesia, Vietnam, Singapore and Thailand.
He noted a broad-based expansion in the first quarter of 2022, with agriculture, forestry and fishing increasing by 0.2%; industry by 10.4%; and services by 8.6%.
Still reeling from the effects of the pandemic, the manufacturing sector is also posting an aggressive performance, with the S&P Global Philippines Manufacturing Purchasing Managers’ Index hitting 54.1% in May this year, the highest in more than four years. .
Consumer and business confidence is on the rise: consumer confidence is expected to reach 30.4% over the next 12 months, while the business confidence index is expected to reach 69.8% for the same period after reaching 59.7% in the second quarter of 2022.
Foreign direct investment from the Philippines is “soaring”, with net inflows jumping 8% to $1.71 billion in January and February 2022, after hitting a record high of $10.5 billion in 2021.
Gross international reserves (GIR) at end-April 2022 stood at $106.8 billion, equivalent to 9.4 months of imports – three times more than the minimum three-month standard that the Bangko Sentral ng Pilipinas (BSP) must maintain .
“Household consumption increased by 10.1%, while government consumption increased by 3.6%; exports and imports also improved with an expansion of 10.3% and 15.6%, respectively,” Diokno said.
Employment has ‘improved dramatically’, with 1.5 million jobs created from February to March this year, up from a record unemployment rate of 17.6% at the height of lockdowns in April 2020.
While massive spending was needed as part of the government’s response to the pandemic, which led to an increase in the debt-to-GDP ratio, Diokno is confident that debt will drop to 60.4% in 2024, two years after the beginning of the Marcos administration.
“It should be emphasized that our current level of debt-to-GDP ratio is well below that of other economies, some of which have debts in excess of 100% or even 200% of their GDP,” he said.
The Philippines’ debt stood at 63.5% of GDP at the end of the first quarter of 2022.
As for the provisional advances in the amount of $10.3 billion, the BSP granted to the national government at the height of the health crisis in 2020-2021, Diokno announced that they had been fully paid before the deadline of 11 June 2022.
Diokno also noted that the Philippines will continue to attract foreign investment with the enactment by the current administration of the amended Retail Trade Liberalization Act, the Foreign Investment Act and the Public Utilities Act.
To give the reform momentum an extra boost, the tax system Marcos will inherit is “much better,” according to Diokno, after the Duterte administration reformed personal income tax and corporate income tax. companies; raised cigarette taxes three times; increase in the tax on petroleum products; and imposed a tax on sugary products for the first time.
Marcos’ development program will also be supported by a “better state of infrastructure”.
“Over the past six years, the Duterte administration has invested heavily in infrastructure through its Build, Build, Build program. I call 2016-2021 the golden age of infrastructure in the Philippines, with infrastructure spending as a percentage of GDP reaching an average of In contrast, infrastructure spending as a percentage of GDP averaged 1.5% from 2001 to 2009 and 2.5 from 2010 to 2015. A total of 88 flagship infrastructure projects due for completion in 2023 and beyond will be the responsibility of the next administration,” Diokno said.
He underscored the need for continuity in governance to sustain economic gains and improve the welfare of Filipinos.
“As the changes come with a new set of challenges, I believe the country will benefit significantly from the political continuity that the new administration is about to observe,” he said. “I am confident that the transition of administration in the Philippines will pave the way for more economic gains for the Filipino people,” he added.
Diokno said earlier that Marcos and his economics team aim to reduce poverty to single digits by the end of Marcos’ term.