The administration of President Rodrigo Roa Duterte is not all “Drug
war”, this can be attested by the fact the President’s economic team has laid
down a massive undertaking the Philippine government has not seen ever, until
now.
The current economic team of Duterte has implemented the so called
Golden Age of Infrastructure thru its “BUILD, BUILD, BUILD” projects which will
provide more growth spurts for the country now on its implementation and a lot
of years more when its completed.
New York professor Panos Mourdoukoutas of Forbes Magazine wrote a
very insightful article about the economic policies of the current
administration and the repercussion of having an ally of the Duterte as the top
banker of the Bangko Sentral ng Pilipinas (BSP).
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| President Rodrigo Roa Duterte (photo credit to owner) |
For purposes of public knowledge, truthfulness and clarity we have fully quoted said article for the convenience of our readers, below.
Duterte Could Turn Philippines Into The Land Of Easy Money And Build,
Build, Build
President
Rodrigo Dutere could turn the Philippines into the land of easy money that will
end up financing his ambitious Build, Build, Build agenda.
That’s a massive construction plan that is expected to drive the
country’s growth for years to come , and
create jobs for the Philippines labor force.
Early this week, President Duterte
appointed political ally Benjamin
Diokno to head of the country’s central bank, Bangko Sentral ng Pilipinas (BSP).
That’s unusual for the Philippines and any modern
democracy, where the tradition is for neutral appointments. And i t
could mean the end of the independence of the country’s central bank, and the
paving of easy money in the form of low interest rates and runaway government
deficits.
At least that’s the
interpretation of financial markets that have been unsettled by Diokno’s appointment.
For years, an independent (BSP) has been a big asset for the Philippines
economy. It provided the macroeconomic conditions to let the Philippines
economy grow at rates that parallel those of China.
High
growth rates, in turn, helped elevate the country’s standard of living.
The Philippines’ per-capita GDP was last recorded at an all-time high of
$2,891.36 in 2017, according to Tradingeconomics.com . That’s well above the average of $1,627.98 for
the period 1960-2017.
If
it comes true, the end of BSP independence could change the game for the
Philippines economy. It could bring back macroeconomic instability in the form
of soaring government deficits, and inflation--one of the country’s old villain s .
To
be fair, inflation has been coming down recently. Consumer prices rose at3.8% in February of 2019, down from 4.4% in the
previous month.
That’s thanks to restrictive policies
of BSP last year. But the situation could change if BSP’s independence is
compromised, and the new leadership shifts from a restrictive policy of fighting inflation
to an accommodating policy that will bring it back.
Inflation
will add to the country’s other problems --
l ike corruption, which is
getting worse, according to Transparency International. Then there’s the ongoing
drug war, which continues to divide up the country.
And
there are Duterte’s South China Sea flip-flops, which raise rather than reduce
the prospect of war in the region.
Inflation -- together
with social unrest, corruption, and violence -- has suspended
Philippines economic progress before, and it will do it again, if they aren’t
addressed effectively.
That’s
why investors have every reason to be concerned with Duterte’s
unusual choice for a central bank chief.
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