The economy: Challenges and opportunities for the Marcos administration

Art Fuentes, ABS-CBN News

Posted at Jun 30 2022 12:32 AM

President-elect Ferdinand ‘Bongbong’ Marcos addresses members of the media during a briefing at the BBM Campaign Headquarters in Mandaluyong City on May 23, 2022. Jonathan Cellona, ABS-CBN News
President-elect Ferdinand ‘Bongbong’ Marcos addresses members of the media during a briefing at the BBM Campaign Headquarters in Mandaluyong City on May 23, 2022. Jonathan Cellona, ABS-CBN News

MANILA - President-elect Ferdinand “Bongbong” Marcos Jr will inherit an economy that appears to be outperforming its peers in Southeast Asia in terms of bouncing back from the pandemic. 

But it is also a country facing spikes in food and fuel prices, a possible food crisis, as well as ballooning debt levels. 

Marcos has said he would focus on "jobs, jobs, jobs, prices, prices, prices" during his administration. He even specifically said that he wanted to bring down the price of a kilo of rice to P20 to P30. Will he be able to deliver on these promises?

THE GOOD NEWS

The Philippine economy grew 8.3 percent in the first quarter, much faster than Indonesia’s 5 percent, which was the second-fastest growth among the major ASEAN economies.  

According to outgoing National Economic and Development Authority (NEDA) Secretary Karl Chua, the country had already surpassed its pre-pandemic GDP level with its impressive Q1 growth. More people also had jobs, thanks to the easing of pandemic restrictions which reopened vast sectors of the economy. 

Remittances from overseas Filipinos also continued to grow, supporting the Philippines’ consumption-driven economy. 

Marcos will also be inheriting some of the biggest infrastructure projects the country has ever undertaken, several of which are slated to become operational within his term. 

The privately-funded MRT-7, the government-backed Metro Manila Subway, and parts of the North-South railways are all expected to be finished before 2028.

Foreign business chambers are also bullish about the recent reforms to the country’s investment laws which they say will attract more foreign capital into the country.

THE BAD NEWS

The bad news? Inflation has shot up, quickening to 5.4 percent in May. 

Fuel prices have skyrocketed. As of June 27, diesel prices had already gone up by P45.90 per liter since the start of the year, gasoline by P30 per liter, and kerosene by P40.15 per liter, according to data from the Department of Energy and oil firms.

Food prices, which had already been a headache for consumers since last year, also continued rising, partly due to the conflict in Eastern Europe. 

Agriculture industry groups and food manufacturers have also warned of a looming food crisis and possible food shortage.  

There is also the country’s debt, which was already at P12.76 trillion at the end of April, more than double the level since President Rodrigo Duterte took over in 2016.  

And to top it all, there is still the uncertainty of the pandemic. Lockdowns in 2020 which were imposed to curb the spread of the virus had also sent the economy into a tailspin

FUEL PRICES AND ENERGY

With diesel prices having more than doubled since June last year, transport groups have called for a suspension of fuel excise taxes. 

But Marcos has said that instead of suspending fuel excise taxes, he prefers to continue subsidies.  

"I prefer to handle the problem on the other side of the equation and provide assistance to those who are in need," Marcos has said.

He has also been quoted saying there is little that the government can do to stop fuel prices from rising.

In terms of energy policy, Marcos has also been quoted favoring renewable sources. 

He said he favors new geothermal and hydroelectric power plants, and the more solar and wind power sources. Marcos Jr. also said he would push for the use of large-scale battery storage to store unused energy generated by renewable sources.

Another plan is to revive the $2.2 billion Bataan Nuclear Power Plant.

As of this posting, Marcos has yet to nominate his Energy secretary.
 
‘FOOD SOVEREIGNTY’

Marcos himself will helm the Department of Agriculture in the pursuit of what he earlier called “food sovereignty.” 

He said he would increase domestic food production while decreasing dependence on imports from outside the country.

Marcos has also famously said that he wants to bring down the local price of rice to P20 to P30 per kilo. Farmers' groups and even the incumbent DA chief have already expressed their doubts that this can be achieved.  

The incoming president also said he seeks to amend the Rice Tariffication Law.

TAXES, DEBT AND INFRASTRUCTURE

Marcos’ pick for Finance secretary has already downplayed suggestions that new taxes be imposed to help pay off the country’s debt.  

Outgoing Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno suggested that if the country keeps growing at around 6 to 7 percent, this would be enough for the Philippines to “outgrow” its debt.  

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Marcos’ choice for Socioeconomic Planning secretary meanwhile has said that the country needs to balance its pursuit of new infrastructure with social protection, health, and education. 

“What do you do with world-class infrastructure, when your people are getting ranked, their children are ranked poorly, the poorest in the region? That is the dilemma,” said incoming NEDA Director-General Arsenio Balisacan. 

INVESTMENT

Marcos’ candidate for Trade and Industry secretary has said that he will focus on small businesses, high-tech investments and digitalization. 

With e-commerce given a huge boost during the pandemic, incoming Department of Trade and Industry (DTI) chief Alfredo Pascual said digitalization would give market access to MSMEs. While the present DTI administration has made similar statements, it remains to be seen how different Pascual’s push will be.

A more immediate concern for Pascual is taking care of consumers. As consumers reel from the high prices of basic goods, many food manufacturers are also asking to be allowed to raise prices, citing the rising costs of raw materials. 

THE TASK AHEAD

Various business groups have lauded Marcos’ choices for his economic team. Many of them are eminent economists who have years of experience working in the government and the academe.  

But are they up to the task at hand? The pandemic has not completely gone away. Fuel prices have skyrocketed. Inflation is rising. Interest rates are rising. The country’s debt has more than doubled under the Duterte administration. A food crisis looms. 

Diokno has said he is not worried because he “has seen the worst.” 

Will the next few years prove him correct?

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