The Philippines will have its 17th president this week when President Rodrigo Duterte ends his term on Friday. President-elect Ferdinand Marcos Jr. will take over the reins of power on the same day, and I believe the event will be one of the smoothest transitions in our history.
Mr. Marcos’s government will largely be a continuation of President Duterte’s economic policies, which for the most part of his tenure resulted in robust economic growth rates. From what I read in newspapers and hear on radio and television news programs, the incoming administration is bent on keeping the macro-economic fundamentals of the country and on adopting a fiscal consolidation program to reduce government debt.
The initial economic pronouncements of Mr. Marcos show that he is a well-grounded person. He is not easily falling into populist suggestions that could only damage the economy in the long-term. One instance is the clamor to suspend the excise tax on petroleum products. Like a true statesman, Mr. Marcos dismissed the idea—aware that the option will not necessarily alleviate the plight of consumers and transport drivers.
He preferred the provision of aid to the sectors affected by rising fuel prices instead of suspending the excise tax on oil. For Mr. Marcos, a direct aid or a form of “ayuda” will address the financial problems of certain sectors in the economy. I agree with what Mr. Marcos intends do. Giving financial assistance directly to those reeling from high fuel prices, like public utility drivers, is a better option than lowering the excise taxes.
Bus, jeepney and taxi drivers and those severely affected by surging oil prices deserve the assistance because their livelihood is at stake. The direct aid to the poor is a Solomonic solution because the government at the same time can keep its revenue base intact in order to fund other social services.
The revenues from excise tax collections, based on my previous stints in the Lower House and the Senate, have already been earmarked for salaries of teachers, and social services programs. The new administration may be forced to borrow money if proceeds from the excise tax on petroleum products, amounting to about P105.9 billion this year, are lost. That, to me, is an example of poor governance.
Mr. Marcos’s preferred solution is in sync with the plan of his economic team. As I’ve said in this column before, his new economic team is not a deviation from the outgoing group of President Duterte. Businessmen and foreign investors want policy continuation and a more predictable business environment.
I can confidently say that the Philippine economy is in good hands for the next six years of the Marcos presidency. The new economic team this early is plotting the Philippine growth strategy based on what has been achieved by the outgoing administration.
Outgoing Bangko Sentral ng Pilipinas Governor and incoming Finance Secretary Benjamin Diokno will be at the helm of the economic team. One of the major economic goals of the incoming Marcos administration is attaining an “A” investment-grade rating that will lower the borrowing cost and lure more foreign investors.
If not for the global health crisis, the Duterte administration could have achieved this goal. The Philippines was on its way to an A-level credit rating before the pandemic struck. The outgoing economic team led by Finance Secretary Carlos Dominguez III conceded that the Covid-19 pushed back the goal temporarily.
A better tax administration and a fiscal consolidation plan are the key to achieving the “A” investment grade rating. The Philippines may just achieve this under the Marcos administration. International credit rating agencies have been confident of the Philippine economic growth story despite the damage done by the pandemic.
They have kept the BBB investment-grade rating on the Philippines on several occasions compared with the series of downgrades on several advanced and emerging economies.
Credit rating agencies respect the nation’s strong fundamentals and adequate buffers against external shocks. Our international reserves are at a healthy level of $103.65 billion as of end-May, while foreign exchange receipts from overseas Filipino workers and dollar income from business process outsourcing companies remain robust.
The smooth transition from the Duterte administration to the Marcos administration will help our cause to achieve the coveted “A” credit rating. We have a popular president, and I’m sure this huge mandate from the electorate will bear economic fruits.