Philippine Economy Signs Point to Continue under President Duterte Administration

Bonifacio Global City C3 Block, Taguig City, Metro Manila, Philippines. Bonifacio Global City has been expanded to include this new block as the high end part of the area. This are contains some restaurants as well as some well known high-end brands of clothing and accessories. This block also features the new Dolby Atom and 4-D cinemas. Photo:ryancapulong.com

Signs point to continued growth under Duterte

President Rodrigo Duterte and former President Benigno Aquino present a study in contrasts in leadership styles. The question is whether the differences in personality will affect the politics, policies and, ultimately, the economic performance of the Philippines.

The new government will be formulating its economic and fiscal strategies against a favorable economic and fiscal backdrop. Average real gross domestic product growth since Aquino took office in mid-2010 has been higher than in any previous administration since the 1986 "People Power" revolution. During the January-March quarter of 2016, national government debt fell to its lowest level as a share of GDP since 1997.

These favorable factors led to the Philippines' sovereign credit rating rising by four notches to Baa2 from Ba3 during Aquino's six-year term. Notably, the country's rating went to investment-grade for the first time in 2013.

STAYING THE COURSE

Duterte's party has outlined a 10-point economic agenda that underscores broad policy continuity. The agenda's primary emphasis is on maintaining current macroeconomic policies, and also builds on the key themes emphasized by the Aquino administration, such as ensuring the attractiveness of the Philippines to foreign investors, enhancing tax administration and accelerating infrastructure development.

In line with the anti-establishment bent of his electoral campaign, Duterte has also emphasized that he will focus on more inclusive growth, as seen by his agenda's inclusion of more support for agriculture and education, and the expansion of transfers to low-income households.

The most radical departure that Duterte has indicated he would make from Aquino's economic policy is his willingness to liberalize foreign investment restrictions via changes to the 1987 Constitution. Limits in this area have contributed to the Philippines' low levels of foreign direct investment relative to other countries. The easing of ownership restrictions could significantly support medium-term economic growth.

The credit implications of any future policies for the country will only become apparent over the coming months. In particular, the new government has signaled its willingness to tolerate wider fiscal deficits to accommodate more spending. However, this would entail stepping up public spending -- a departure from the persistent underspending that has contributed to narrow fiscal deficits for much of the past six years.

Indeed, between 2010 and 2015, the Philippines recorded one of the narrowest deficits among emerging countries in the Association of Southeast Asian Nations. In fact, the Philippines was the only country in the bloc to record a fall in general government debt as a share of GDP over that time.

Notwithstanding the impact of any imminent shifts in fiscal policy, growth should remain robust through at least the next two years, and the Philippine central bank will likely maintain its focus on sustaining macroeconomic and financial stability.

Unlike many other more commodity-dependent emerging markets, the Philippines has not experienced a negative terms of trade shock from the turn in commodity prices since 2014. Also, lower prices for energy and food imports have stimulated private consumption, which reached a multiyear high in 2015.

At the same time, rapidly growing services exports and healthy domestic demand have proved resilient to negative spillover from the slowing of the Chinese economy.

POLITICAL RISK

When it comes to sovereign credit ratings, credit analysts have to deal with the assessment of political stability.

As for whether a government under Duterte will be stable, his clear victory in the May election is comparable to Aquino's 15.8-percentage-point advantage during the 2010 polls, and is supportive of political stability. Moreover, a majority of legislators in the House of Representatives are said to align themselves with Duterte, further bolstering the prospects of reform.

The margins of victory in 2010 and 2016 stand in contrast to the 3.5-percentage-point win by Gloria Macapagal Arroyo in the 2004 presidential vote. Combined with subsequent allegations of cheating, Arroyo's narrow margin contributed to recurring challenges to her electoral legitimacy, including attempted coups, impeachment complaints and a mass resignation of cabinet secretaries in 2005.

The Arroyo administration was marked by declining scores in the World Bank's Worldwide Governance Indicators, including those for political stability and the absence of violence, control of corruption and rule of law.

The WGI provide some useful angles to assess the quality of governance across a wide set of countries according to six dimensions: voice and accountability; political stability and absence of violence; government effectiveness; regulatory quality; rule of law; and control of corruption.

These indicators have generally improved since 2010, reflecting the Aquino administration's emphasis on good governance. Over the past few years, policymaking -- such as the budgetary process -- has become more transparent and predictable. The government has also worked toward deregulation to enhance ease of doing business.

The introduction of a competition law has also helped to level the playing field in the private sector. This situation has in turn contributed to stronger investor confidence and economic performance, as well as higher credit ratings.

Duterte's campaign emphasized law and order issues, and burnished the mayor's reputation for being tough on crime and corruption -- a stance somewhat aligned with the "straight path" that Aquino has espoused. However, the new president's comments promoting an extrajudicial approach to addressing crime, for instance, have attracted widespread criticism and could weigh on such elements of governance as the rule of law, political stability and the absence of violence.

We will soon find out whether Duterte's more controversial pronouncements on the campaign trail will translate into actual policy, and if the improving trend in governance will continue. – Nikkei Asia Review

Christian de Guzman is a vice president and senior credit officer for Moody's Investors Service.

 

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Arlington grad Beram the fastest in the Philippines

Philippine- American Trenten Beram. Goal's to represent the Philippines in 2020 Olympics

One step at a time.

It's not so much about speed as it is precision and making incremental progress. That's an unusual tactic for an elite sprinter, but slow-and-steady seems to work for Trenten Beram.

At least when it comes to his Rosetta Stone software. The 20-year-old Hopewell Junction resident is using the computer program to learn Filipino. In Beram's estimation, he must become comfortable enough with the language to at least mouth the words to the national anthem.

After all, he is a track and field record-holder in that country and, now, a member of its national team. He'd prefer not to be the "American" smiling awkwardly as the anthem of the Philippines is played before international competition.

The former Arlington High School standout set a record last month for the fastest 200 meters in Philippines' history. He competed in the Philippine Athletics Track and Field Association Trials in Pasig, completing the race in 21.12 seconds on June 24. His time surpassed the mark of 21.17, set by Ralph Waldy Soguilon in 2007.

"It's great and this means a lot to me," Beram said, though he began to chuckle. "I would've never imagined I would set a record. It's kind of hard to believe that no other Filipino has ever run faster than this."

Beram's time in the PATAFA Trials, though a record, was short of the Olympic qualifying standard of 20.5 seconds so he will not compete in Rio de Janeiro next month. But Beram did earn a spot on Team Philippines, which will compete in the Southeast Asian Games in Malaysia in August 2017. There, he plans to run the 200 and be part of the 400-meter relay.

It's an accomplishment that his father, Glen Beram, joked will often be retold and even embellished in stories to great-grandchildren someday. Trenten dedicated the race to his paternal grandmother, Sandy Beram, who died on June 16.

"I'm proud but not surprised because we knew how talented he was from early on," Arlington track and field coach Steve Arnett said. "He's meticulous. Just watching him warm up and run drills, everything was always precise and textbook. He's a force to be reckoned with and he always has that determined look, like James Bond."

From the Philippines, with love.

​Beram was born in Scarsdale and grew up in Hopewell Junction. He picked up track in the 11th grade at Arlington but immediately excelled, breaking several Dutchess County records and earning All-American honors.

Trenten's father is American but his mother, Nena Beram, was born in the Philippines and moved to the United States when she was 3. Trenten visited the Philippines only a few times as a child, but his ancestry enabled him to apply for citizenship to the country, which then allowed him to compete.

Trenten first applied for citizenship to the Philippines last November. He and his mother traveled there to the Bureau of Immigration and spent hours completing paperwork. They went back on June 9 and the process was finalized on June 13, while Trenten was training for the race.

The wheels first were put in motion three years ago, though, when the Berams were contacted by a track recruiter from the Philippines who floated the idea of him gaining dual citizenship and competing internationally. The family was put in touch with the president of PATAFA, Philip Ella Juico, who urged Trenten to represent his mother's native land. After a series of email exchanges and two years of college, the Berams agreed.

Trenten said he was battling a minor hamstring strain when he set the record and that time wasn't even his personal best. He had run the 200 in 21 seconds last year while competing for the University of Connecticut. But that didn't count as the record, because he wasn't yet a Filipino citizen.

He got back to New York on Saturday, and he intends to return to UConn in the fall for his junior year, continue studies for his mathematics major, and compete as a collegiate sprinter. His ultimate goal, however, is to qualify for the Olympics in 2020, representing the Philippines.

"Being an Olympian is not something that just comes along and most athletes never get the opportunity," he said. "It would be huge. It's one of the greatest honors that anyone can achieve. I'd want to win, obviously, but I wouldn't worry so much about how I do there. Just getting there would be a big accomplishment."

Just reaching this stage in track and field already is a big accomplishment. Beram played baseball in high school and was a defensive standout in centerfield for the Admirals. "Not to brag," he said, "but I made some really nice catches in the outfield." Well, given his speed, one can imagine he had exceptional range.

It was on the suggestion of teammates, in passing, that he try out for the indoor track team to keep himself occupied in the winter and prepare for baseball in the spring.

"I made nationals my first (season) in track and I started getting college offers," Beran said. "I was blown away. I was thinking, 'This never happened in baseball, so I should probably stick with (the) sport.'"

Glen Beram, a fitness buff who operates a gym, said he knew his son would be fast when he playfully challenged his 7-year-old to a race, and lost.

After the conversion to track, Trenten soon set school and county records in the 55, 60, 200 and 400 meters, and the 300-yard sprint, according to Arnett, whom Beram credits for improving his strength and stamina. He never did return to baseball.

"My first impression of him was like the reaction when you see a Lamborghini parked," Arnett said. "You can just look and tell it's fast. Within three weeks, he was our fastest runner. He had something special and there was no hiding that."

Though Trenten didn't spend much time in the Philippines, aside from visiting three times as a small child, he was never far removed from the culture. His grandmother, Carmen Manugas, would visit often. Trenten said he remembers her singing him Filipino lullabies and making his favorite dish, congee, a traditional rice porridge.

"The poverty level was so high that even though my kids were young, they were moved by how little the kids in the Philippines had," Glen Beram said. "Every day was a struggle. It left an impression on them, how lucky we were. I think Trenten wanting to represent the Philippines was a byproduct of him remembering that." - Poughkeepsie Journal

Stephen Haynes: shaynes@poughkeepsiejournal.com, 845-437-4826, Twitter: @StephenHaynes4

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