First of two parts
BY this time next week, we will know who will be the winning presidential candidate. It must be stressed though that winning an election is the mere start of the challenge of governance. The real challenge comes when one starts governing. As the famous Cuban revolutionary leader, Fidel Castro, once declared, "It is much easier to topple a government than to establish a good one!"
For the sake of transparency, I would like to inform our readers that I am one of the analysts who participated in writing the "0 plus 10" economic agendas of the Duterte administration. We started with eight that were unveiled on May 12, 2016 by Finance Secretary Carlos Dominguez 3rd during a press conference held at the Marco Polo Hotel. Then, former Socioeconomic Planning Secretary Ernesto Pernia, who also heads the
National Economic Development Authority (NEDA), added two (i.e. population management, and science and culture), and the security guys added the cross-cutting security agenda (the 'O').
The political economy environment today is far different from the one prevailing six years ago. In 2016, the economy was growing at an annual average rate of more than 6 percent. Our foreign currency reserve was robust which, in fact, even led us to contribute to the International Monetary Fund to help other countries in dire financial straits. We reduced our poverty incidence from more than 28 percent in 2009 to just above 16 percent in 2016. We were on the way to becoming a high middle-income country by 2023 as projected by the World Bank.
But the outbreak and spread of Covid-19 in early 2020 and the series of lockdowns brought our economy to its knees. In the agricultural sector, there was the added problem of the African swine fever (ASF) decimating a quarter of our hog population. Because of the pandemic, our financial resources were stretched to the limit to respond to the Covid-19 health challenges and mitigate its adverse economic effects through the extension of a plethora of Social Amelioration Programs to our most vulnerable population.
NEDA estimated that we practically lost three years of economic growth. It also projected that our pre-Covid economic status (which is 2019) can only be recovered in 2025 assuming we grow at least 6 percent annually for the next three years. We lost around P3 trillion during the pandemic while our neighboring countries, particularly Vietnam and China, maintained their economic growth although at a lower level.
Our misfortunes did not seem to end in 2021. Early this year, the Russia-Ukraine conflict erupted, causing the prices of petrol and agricultural commodities to soar. The two countries are major exporters of wheat, corn and sunflower seed as vegetable oil. Russia is a major oil and natural gas exporter. With the Western countries' embargo on trade with Russia and the inability of Ukraine to ship out their products from the Baltic Sea, artificial shortages of petrol products and agricultural commodities rippled around the world. Fertilizer prices have more than doubled. It is expected that global farm productivity will decline as a result of lower fertilizer application.
Then there is the avian (bird) flu outbreak in various areas of the country hitting particularly our duck and quail population. The Bureau of Animal Industry (BAI) claims that the bird flu virus comes from migratory birds that visit various parts of the country, and this explains why a number of provinces stretching from Luzon down to Mindanao have been affected. BAI further reports that it is closely monitoring the situation to prevent further spread of the virus to our poultry population. If that happens, our poultry industry will suffer the same fate as our local hog industry that was decimated by the ASF.
Seven top governance agendas
Our drastically altered political economy situation compared to that of 2016 when President Rodrigo Duterte assumed the presidency means that the incoming president will have to align his governance agendas to the development challenges confronting us now. There are seven of them on my list.
Foremost is managing our fiscal position. Our debt-to-gross domestic product ratio was a little less than 40 percent at the start of the Duterte administration but has risen to more than 60 percent. While our debt is still manageable and is still below vis-à-vis other countries, we cannot be complacent about this matter. Our debt has ballooned to around P12 trillion while we only have an annual budget of P5 trillion. Our revenues are down because we have not fully recovered from the adverse effects of the pandemic and the ASF. Many workers are still out of jobs and numerous shops and restaurants remain closed. The tax collection effort is seriously constrained by this reality.
We can borrow money from our creditors but in the end, we have to pay for them. Our credit rating depends on how we manage our fiscal position. If creditors adjudge us as a risky borrower, they will be hesitant to lend to us, will lend us at a higher interest rate, or demand a hefty collateral from us.
The case of Sri Lanka, which recently defaulted, is a good reminder of a badly managed fiscal regime. It lowered taxes in support of the populist demand to reduce taxes on basic commodities to make them affordable to the poor consumers. In the meantime, it financed ambitious development projects that have little positive value to the economy (e.g. construction of a huge shipping port and shifting totally to organic farming) and which, in turn, further drained government coffers. The end result is a bankrupt government that cannot finance the procurement of critical products and services vital in maintaining a decent living to its people. Sri Lanka, therefore, has no recourse but to default on its loans to its creditors.
Ostensibly, maintaining a healthy fiscal position is number one on the list of key governance agendas because the attainment of all other agendas will depend on it.
Ensuring healthy citizens
Due to the lingering threat of Covid-19 to human lives, continuing support to the health sector will remain the next top priority. Our economic recovery effort will be stymied if people do not feel safe to travel to their work places, buy goods in shops, take leisure trips for their breaks, etc. The mobility of people and goods is highly dependent on how effective we are in preventing the further spread of Covid-19 and in infecting our citizens, particularly those who are vulnerable.
In addition, once we are able to manage the virus better, we will be able to respond more effectively to other common diseases plaguing our people such as dengue, tuberculosis, among others. Ironically, these diseases have actually killed more of our citizens than Covid-19.