The economy under “Duterminator”
71-year old Rodrigo Duterte, the oldest Filipino to be elected president, will assume office at the end of the month. Backed by close to 40% of the electorate, he will take the helm of government with an indisputable 6-year mandate, amidst high hopes that radical change will happen under his watch, and happen soon. He will bring with him an elderly cabinet, a mishmash of old hands in business and economics, trusted local politicians and school friends, and two representatives from the Communist Party. And if he walks the talk, his will be an action-oriented, results-driven administration unforgiving of corruption and incompetence.
Will Mr. Duterte be good for the economy? Financial market investors seem to think so. But can he act quickly enough, establish a track record of successes and create the necessary buzz to attract investments in job-creating ventures and raise economic growth?
Given what appears to be a smoother government transition, we are hopeful of a shortened learning period with minimal odds of the drastic cutback in public spending experienced in the first 18 months of the Aquino government. We expect to see government infrastructure spending steadily rise to 5% of GDP, perhaps by 2018, to bring economic growth above 6%, or beyond 7%. But to sustain it there or go beyond 8%, Mr. Duterte will have to deliver on the more difficult tasks under the 8-point economic agenda, i.e., freeing up legal restrictions on foreign investments, reforming the agricultural sector, and addressing the security of land tenure.
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