Economic legacy
If one is to grade President Duterte based solely on his economic campaign promises, he will get a failing mark. Infrastructure remains lacking, traffic congestion persists, unemployment is still a problem and poverty continues to afflict millions of Filipinos.
But then the fruits of many of his economic promises are expected to come toward the middle and end of his six-year term. His “golden age of infrastructure” and tax reform package, increased investment flows from nontraditional allies like China and Russia — all these will take time to bear fruit.
As Mr. Duterte delivers his State of the Nation Address today, he is expected to highlight the resilience of the economy and how his administration continues to sustain its high level of growth.
More than this, he is expected to dwell on various programs and projects aimed at addressing poverty, a staple of his campaign sorties. The thrust is the generation of jobs via what his economic team calls “Dutertenomics,” which carries the slogan “Build, build, build”—a massive infrastructure program that earmarks P8 trillion for much-needed airports, seaports, railways, roads, bridges, hospitals and schools up to the end of his term in 2022.
Part of the growth will be financed by increased investments resulting from the President’s pivot away from the United States and to China, Russia and Japan.
This early, China and Japan have promised to finance a number of bridges crossing the Pasig River and railways connecting the capital to nearby provinces, even an ambitious subway in Metro Manila. These infrastructure projects are estimated to generate some two million jobs annually.
Another highlight in the first year of the Duterte administration is the tax reform program, which, according to the government, is designed to create a simpler and more efficient tax system.
A major initiative is the proposed reduction of the income tax burden of the working class, a campaign promise of the President.
Once it is implemented, Filipinos earning less than P250,000 annually will be exempt from paying taxes, thus increasing the take-home pay of average salaried workers.
Taxes on certain consumer products will increase, but according to government simulations, the net effect would remain positive for taxpayers.
But Mr. Duterte’s first year in office also saw the peso weaken past the 50-to-$1 level — the lowest in more than a decade. The depreciation of the local currency actually started four years ago following expectations of a recovery in the US economy and the resulting increase in US interest rates, which tend to attract funds away from emerging markets like the Philippines.
But a weaker peso has its pros and cons. While it tends to increase prices of imported goods like oil, it makes exports competitive and increases the revenues of dollar-earners like overseas Filipino workers and the booming business process outsourcing sector.
A shift away from the public-private partnership mode of undertaking infrastructure projects has also been met with concern and apprehension by the private sector, although the government has promised them that such a shift to official development assistance funding would actually speed up implementation of these projects.
The Philippine economy seems to have weathered the President’s controversial first year—a testament to the fact that it has been made stable by previous administrations.
Moving forward, the second year of his term must start seeing economic plans becoming reality and project proposals becoming actual infrastructure. And as long as the President leaves economic matters to his able economic team, the country can sustain its high economic growth trajectory. This will create the jobs that should eventually be the best solution to addressing poverty.
