The economic agenda outlined by the incoming administration of president-elect Davao City Mayor Rodrigo Duterte will be good for the financial markets, investment bank J.P. Morgan said in a report Friday.
“We believe that financial markets will welcome the explicit commitment of the incoming administration in keeping the current macro-economic policies, particularly its focus on infrastructure. The absence of any drastic shifts is encouraging, in our view,” it said.
“However, given the broad pronouncements, the appointment of a capable and experienced cabinet and economic team, and eventually, the ability to execute, are the next milestones to watch for,” it said.
It said the focus on grassroots development was also laudable, as inclusive growth became a persistent problem of the economy. It also said it helped that the new government was cognizant of the need to maintain fiscal discipline despite its goal of making income tax more progressive.
“We think this should assuage concerns about Duterte’s lack of clarity on his economic platform,” J.P. Morgan said.
Carlos Dominguez, a member of Duterte’s transition committee, earlier listed eight broad economic points for the incoming administration. He said the new government would maintain the current macro-economic policies, but would focus on eight economic priorities.
The new administration aims to implement progressive reforms in the two major revenue collection agencies, Bureau of Internal Revenue and Bureau of Customs, to reduce corruption and ultimately increase tax effort.
The Duterte administration aims to accelerate spending on infrastructure, including public-private partnership projects, in a bid to maintain government infra spending ratio of 5 percent of GDP.
Dominguez said the new administration was planning to revisit the economic provisions of the Constitution, particularly the foreign ownership limit.
There is also a plan to adopt Davao City’s model where ease of doing business was not an issue to enhance competitiveness. Core to this objective is to reduce criminality and improve security for people and business.
Also included in the policies are the modernization of the agriculture sector, addressing the land administration and management, more progressive tax administration, expansion and improvement of the conditional cash transfer program and strengthening of basic education system.
The new government plans to strengthen training in communication, logical thinking and mathematical skills in the basic and primary education system. It also intends to expand scholarship programs, Dominguez said.
Major global debt watchers Standard & Poor’s Ratings Services and Fitch Ratings said the investment grade rating of the Philippines would not be affected by the change in leadership after the May 9 polls.
“We expect fiscal and economic policies under the incoming administration to remain supportive of the ‘BBB’ long-term rating on the Philippines,” S&P said in a report this week.
“Nevertheless, we expect the incoming administration to continue with policies that had contributed to sovereign rating improvements in the past few years,” S&P said.
S&P said Duterte’s track record of more than 20 years in Davao gave few indications that he would embark on economic policies significantly different from the Arroyo and Aquino administrations.
Fitch said it would continue to monitor if the reforms instituted in the Aquino administration would be sustained in the new administration.
