DAVAO CITY: The Duterte administration’s rebalancing of the Philippine foreign policy by concluding trade agreements with China and Japan, and the President’s upcoming visit to Russia would “offset whatever possible protectionist policies” that might emanate from the US under the presidency of Donald Trump.
“The Duterte administration is pushing a broad range of institutional and economic reforms with the goal of not only achieving high growth, but also shaping that growth so that it will become truly inclusive,” Finance Secretary Carlos Dominguez 3rd said Friday at the fifth Business Forum organized by The Manila Times. “To achieve that goal, our growth must be investment-led instead of consumption-led.”
Dominguez stressed that “adept monetary policies kept the inflation rate benign,” which, coupled with the country’s investment-grade rating, would encourage more investments from the private sector.
“The only uncertainty on the horizon is the final direction the Trump administration will take the US economy,” he said at the forum titled “The Philippine Economic Outlook for 2017,” with the theme “Peace Toward Sustainable Prosperity.” “Many fear a sharp rise in protectionism should Trump translate his rhetoric to actual trade policies,” he added.
Dominguez said that protectionist policies will dampen trade and may badly affect the BPO or business process outsourcing sector, which is the Philippines’ second-highest dollar-earner. He warned that the rise in protectionism could likewise lead to the election of populist parties in some European countries this year.
He stressed that the administration was fortunate to have concluded trade, investment, and development assistance agreements with China and Japan that amounted to a trillion pesos. He said Duterte’s visit to Russia later this year would also open new markets.
“All these gains should more than offset whatever possible protectionist policies that the Trump administration might decide to institute,” Dominguez said at the forum that was also attended by Chinese Ambassador to Manila Zhao Jianhua. “And with the great help that we’re currently receiving and going to receive from the People’s Republic of China, we will certainly achieve all our goals.”
But he added that whatever happens, the Duterte administration is bent on pushing through with its 10-point economic agenda in order to narrow or close the Philippines’ “infrastructure gap” with its neighbors, which have invested five percent of their GDP in infrastructure over the past two decades, while the Philippines invested only half of that. He reiterated the need for the country to rapidly upgrade infrastructure in order to produce investment-led growth that would require ample government revenues.
“We lack efficient ports and airports, roads, and bridges,” Dominguez said. “That lack merely magnified the archipelagic nature of our economy—itself already a hindrance on economic integration. Our backward infrastructure backbone constrains economic inclusion.”
He cited the government’s ambitious economic program that aims to reduce poverty incidence to 14 percent by the end of the Duterte administration in 2022, and bring the country to high middle-income status by 2040. Thus, the government is targeting a GDP growth of seven percent or more over the next six years.
“The past year was a fruitful one,” Dominguez stressed. “We missed our fighting target of achieving a 7-percent growth rate by just a shade. With increased investment flows and broader investments in infrastructure, I am confident that we will hit that target this year.”