Economic managers downplay S&P ‘worries’

The “concerns” raised by debt watcher Standard & Poor’s Ratings Services that the predictability of policymaking in the Philippines has “somewhat diminished” are not affecting the Duterte administration as it continues to pursue its 10-point economic agenda, Socio-economic Planning Secretary Rolando Tungpalan said. 

“We are sticking to the rules that are already available and there are no new policy pronouncements that take over existing policies under the new administration,” said Tungpalan, who is also the deputy director-general of the National Economic and Development Authority (Neda).

The S&P report has been the subject of media reports about “rising business fears” on the President’s statements.

But Mr. Duterte heaped scorn on the credit watchdog’s views.

“They mentioned about this BB plus, credit rating. I don’t care about you,” the President said in speech during the inauguration of a coal-powered plant in Misamis Oriental.

“I see no evidence of (policy) inconsistencies so far,” Tungpalan told reporters on the sidelines of an annual public-policy conference organized by the government think tank Philippine Institute for Development Studies (PIDS).

Tungpalan cited, for instance, existing laws affecting the mining sector, which he said the government just enforces until such laws are amended.

“We were laying the 10-point agenda and we were consistently following whatever those are,” he added.

The Standard & Poor’s report, however, seems to have been taken out of context since it maintained the Philippines’s “BBB” grade, or two notches above investments rating and a “stable” outlook

The report said the ratings on the Philippines reflected S&P’s assessment of its lower middle-income economy but cited rising uncertainties surrounding the stability, predictability, and accountability of its new government.

But it added that offsetting these “weaknesses” was the Philippines’s strong external position, which features rising foreign-exchange reserves and low and declining external debt.

“The new government to emerge following the May 2016 general election has developed a ‘10-point plan’ to reduce poverty, promote a ‘law abiding society’ and achieve peace settlements with separatists in Mindanao,” it said.

Other priorities include macroeconomic stability guided by orthodox fiscal, economic and development policies, it said.

It even noted that the President “has a strong focus on improving ‘law and order,’ which has allegedly resulted in numerous instances of extrajudicial killings since he came to power.”

It added: “We believe this could undermine respect for the rule of law and human rights, through the direct challenges it presents to the legitimacy of the judiciary, the media, and other democratic institutions.

“When combined with the president’s policy pronouncements elsewhere on foreign policy and national security, we believe that the stability and predictability of policymaking has diminished somewhat.

“We believe the Duterte administration will broadly continue with the fiscal and economic development policies of the previous administration.

“In spite of additional spending on poverty reduction and social and economic infrastructure, we forecast fiscal deficits to average around one percent of gross domestic product (GDP) over 2016 to 2018.

“Competitive unit labor costs relative to peers’ (such as Thailand and Indonesia) and a large young, educated, and flexible labor market imply further strength in services exports over the next five years. Participation in free-trade agreements could provide

further upside to the Philippines’s export earnings.

“Other factors that mitigate risks associated with the Philippines’s international liabilities include a very low reliance on external savings by its bank and company sectors, as well as the low and mainly long-term nature of the government’s external borrowings,” S&P said.

Finance Secretary Carlos Dominguez III maintained “the Duterte administration is loud and clear in its message.”

“We want to achieve a kind of economic growth that is not robust and sustainable but one that actually lifts significantly more Filipinos out of poverty,” he said.

“If one is able to see through the noise created by negative headlines, he may have a better and comprehensive understanding of the exciting, positive changes that are ahead of the Philippines,” he added.

Dominguez, nonetheless, said S&P’s decision to affirm its investment grade rating on the Philippines was a clear sign that the Duterte administration was on the right track.

“This certainly is a good news as it affirms that the Duterte administration is on the right track in pursuing is 10-point socioeconomic agenda that aims to keep the Philippine economy on its high growth path,” he said. LUIS LEONCIO