Of the fact that Filipinos will face more challenging economic times over the next few years there is little doubt.
The COVID-19 pandemic has dealt the world a body blow from which no one knows when full recovery will come. Despite short term signs that the Philippine economy is recovering, the country’s longer term prospects look more clouded.
For one thing, the Duterte administration borrowed heavily over the last two years—P1.31 trillion and counting, and will take about 40 years to pay—to fund the government’s response to the unprecedented public health crisis. Taking out loans locally and from overseas was, of course, one of the very few options available to our national leaders at a time when tax revenues were being pummeled by the sharpest economic contraction in the country’s recorded history.
Government borrowings during a time of crisis were the correct use of the larger fiscal space created by the previous administrations of President Gloria Arroyo (who raised tax revenues) and President Benigno Aquino III (who improved collection efficiency).
But now, with the pandemic seemingly on the wane, seasoned observers everywhere agree that the chickens are coming home to roost.
With countries around the world starting to recover, monetary authorities everywhere are now poised to raise interest rates in an effort to head off the higher inflation that traditionally comes with increased economic activity. The Bangko Sentral ng Pilipinas held off from joining the growing chorus of more expensive borrowing costs but this is only delaying the inevitable, as keeping local interest rates low will lead to a weaker peso which will then cause higher inflation as Filipinos will need to pay more for imports, most especially crude oil used for transportation, and energy.
To make things worse, there seems to be no end in sight for the crisis caused by Russia’s invasion of Ukraine, which has pushed up even more the prices of petroleum, wheat, and agricultural inputs like fertilizer on the world market.
Against this bleak backdrop of negative developments, the Philippines will—in less than three weeks—head to the polls to elect new political leaders who will, ideally, help the country navigate these treacherous waters.
And, as is the unfortunate practice in this country, the candidates’ plans and policies have taken a back seat to their personalities as the main determinants for the hearts and minds of Filipino voters.
This approach should change.
Especially when it comes to choosing the country’s next chief executive, voters should remember that beyond the candidates’ honeyed promises of a better tomorrow looms an economic landscape of challenges that will rival any hardship experienced in recent history. Taxes will almost certainly increase as the government needs to repay its loans (avoiding tax hikes will eventually bring its own more painful crisis down the road). Prices of basic goods and services will surely rise further (we’re already starting to see it happen now in gasoline stations). The peso will weaken, making imported raw materials more expensive. And interest rates will rise in response, making loans more expensive which, in turn, will crimp economic growth.
The economic pain we will feel in the coming years is almost certainly inevitable and—without a coherent action plan from incoming leaders and the support of the citizenry—will likely require Filipinos to once more call on their vaunted “resilience” during times of crises. That is something no one wants.
Over the next three weeks, candidates should carefully consider their messaging when wooing voters. While it is tempting to promise leading the people into the land of milk and honey, they should remember that nothing turns the people against their elected leaders like the disappointment caused by broken promises. Speaking the painful truth on the campaign trail will help mitigate this possibility, and laying down proposed policies can galvanize voters into action.
Over the next three weeks, voters should carefully assess not only candidates who speak to their hearts with promises of an imagined brighter horizon … but, more importantly, those who speak to their minds with concrete plans for the rocky path that lies immediately in front of everyone.
Of the fact that we face a challenging time ahead is a certainty. The choice of the Filipino electorate will determine whether the country faces this reality with mere promises from their new leaders or well-conceived policies. We have three weeks to ponder on the right choice.