The country’s economic recovery is at stake in the May polls. The next president will need to create jobs and help businesses and industries.
If the country’s Covid-19 cases continue to stay low, and there are no new variants that threaten new surges, the next president’s main task will be to expedite economic recovery.
He or she will need to create more jobs, attract investments, and support businesses and industries.
All this requires more spending, but the next president will need to overcome at least two handicaps at the start of his or her term.
One, the government is not as awash with cash as when Duterte took over in 2016. Two, the country’s poor response to the pandemic does not inspire confidence among consumers and investors to reach out for their wallets just yet.
The next president’s economic team — his or her appointees to the National Economic and Development Authority, Department of Finance, and Department of Budget and Management — will have a lot on their plates.
“I actually feel quite bad for the government that will take over because they do not have the buffers and advantages that this (Duterte) administration had when they took over. In fact, this administration squandered some of the buffers,” said Mendoza.
The economy grew as “the rising star in the Asia Pacific” under the late President Benigno Aquino II, an economist by training. His administration managed to lower global risk perception of the Philippines, resulting in credit rating upgrades that lowered the cost of borrowings needed to finance growth.
Aquino also managed to bring down the country’s budget deficit (when government’s expenses exceed revenues) to a low of 0.9% of gross domestic product (GDP) in 2015, his last full year in office. This and his notorious underspending bequeathed Duterte with an economy awash with cash. This allowed Duterte to fund his campaign promises such as salary hikes for cops and soldiers.
Six years later, Duterte’s economic team maintained Aquino’s credit ratings despite the pandemic. But it came at a high price. The government borrowed liberally to keep the country afloat during several lockdowns that forced business shutdowns and job losses. Mendoza said the next administration could not borrow as liberally as before because the country’s debt was already at 60.5% of GDP as of the end of 2021.
The lockdowns also resulted in lower tax revenues. In 2021, Duterte’s last full year in office, the budget deficit ballooned to P1.7 trillion or 8.6% of GDP.
While the pandemic was an “act of God,” Mendoza said the economic scarring would not have been as bad if government response was able to balance public health with the need to keep the economy running.
The next president will need confidence-building measures to show that he or she will do better. “We can stimulate all we want, if there’s no confidence and our protection against the next variant is so weak, we cannot even contact-trace properly, taob din iyan (they will still be knocked down).”
“For a fast-growing economy like the Philippines, you want to convey to investors, to tourists, and to development partners that we are the place you should invest in after this pandemic: ‘Look at what we did during the pandemic and during the worst time of the pandemic. We were able to withstand it.’ This was not the case [under Duterte],” he said.
Another major challenge for the next president is the roll out of the Supreme Court’s Mandanas ruling in 2022, which will increase local governments’ share in tax revenues.
Mendoza feared that “bad governance” would be worse for the countryside. He pushed for transparency and accountability in the use of government funds.