: Marcos administration: So far, so good

By April Lee-Tan CFA |

As discussed in my previous column, investors are lukewarm to the prospects of a Marcos presidency given uncertainties on his economic platform.

I also shared in my column that to alleviate concerns, one of the most important things that President-elect Ferdinand Marcos Jr. should prioritize is to appoint highly qualified economic managers who are competent and have integrity, whom he trusts to work independently to address the problems facing the economy.

After being proclaimed the next president of the Philippines, President Marcos last week announced several appointments to his economic team.

These include Philippine Competition Commission chief Arsenio Balisacan as head of the National Economic and Development Authority (Neda), Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno as finance secretary, and former Neda chief under then President Joseph Estrada Felipe Medalla as BSP governor.

Marcos also named former UP president Alfredo Pascual as trade secretary and Manuel Bonoan, CEO of San Miguel Tollways Corp., as secretary of the Department of Public Works and Highways (DPWH).

Marcos did not disappoint as all five appointees received the approval of the business community given their extensive work experience and competence in heading the country’s economic team.

Balisacan, Diokno and Medalla are all economists that have doctorates, while Bonoan is an engineer and an MBA graduate. Pascual is also an MBA graduate and was previously the president of UP.

Moreover, all five previously worked for the government and well-respected institutions in various capacities, and under different presidents with some even working under the late President Benigno Aquino III.

This, in my opinion, implies that President-elect Marcos picked the five leaders for their skills, and not for their political views, showing his commitment to help the economy recover from the pandemic-induced slump.

The next step for President Marcos is to spell out his economic priorities.

Recall that the Aquino administration prioritized reducing the deficit and increasing tax collection efficiency, while the Duterte administration had its 10-point economic agenda and infrastructure spending program.

Right now, investors would like to know how the Philippine economy can recover from the pandemic and continue to grow above 6 percent while addressing the government’s huge budget deficit and elevated debt levels.

Just last week, outgoing Department of Finance (DOF) Secretary Carlos Dominguez III bared his team’s proposed fiscal consolidation and resource mobilization plan. Recommendations include a three-year deferral of income tax reductions scheduled for individual taxpayers, and the implementation of new taxes in the next three years.

These proposals are projected to raise a total of P349.3 billion in incremental revenues each year, allowing the government to reduce its debts to 55.4 percent of GDP by 2025 from 60.5 percent of GDP last year, without the need to cut back on spending.

It will be interesting to see what part of the plan will be adopted by the new administration.

Although incoming Finance Secretary Diokno said that the government would prioritize the sustainability of government’s debts, he said it was too early for him to make a decision on whether or not to increase taxes, or push for new ones as recommended in the fiscal consolidation and resource mobilization plan.

After all, if the economy can grow faster, revenue collection will increase, allowing the government to fund its spending needs and reduce debts, even without the imposition of new taxes.

I maintain the view that in the short-term, other issues including high inflation, interest rates, the war in Ukraine, the aggressive Fed rate hikes and the weakness of the US market will have a more significant impact on local financial markets.

However, it is reassuring to know that the Marcos administration is taking the right steps so far to help the Philippine economy recover sustainably from the pandemic and to face the ongoing challenges. This should allow financial markets to perform better over the longer term, especially once economic data start showing a favorable trend.