6.4%

The business community, it seems, has reconciled itself with the incoming Duterte presidency.

There was some anxiety expressed during the campaign as candidate Duterte breathed fire with his quotable quotes, all the while repeating that he was no economic expert. The PSEI slackened a bit during the last few weeks of the campaign, partly because the surveys showed the Davao City mayor was about to bulldoze all his rivals.

As soon as the counting began, however, the Duterte camp assured the public the macroeconomic policies that brought the country high growth in an arid global economy will be maintained. Early enough, respected businessman Carlos Dominguez was named Finance Secretary – therefore chief of the incoming president’s economic team.

Dominguez quickly outlined the new administration’s economic program, emphasizing agricultural development and massive investments in infra among others. The incoming president also began naming experienced hands to his Cabinet-in-waiting.

It helped that Duterte himself spoke in favor of relaxing nationality restrictions currently in place. That will help open many sectors of the economy to increase competition.

Last week, NEDA announced the economy grew at 6.9 percent in the first quarter of this year. That makes us the fastest-growing economy in the region. The impressive pace of growth was no doubt fueled in part by election-related spending.

Government targets a growth rate of 6.8-7.8 percent for the year. That is an ambitious target.

In its most recent report, British financial giant Standard Chartered Bank estimates full-year 2016 growth at 6.4 percent. Citibank Philippines announced exactly the same forecast figure.

The growth forecast of the two banking giants is lower than the government target. That is usual. Government tends to put up “fighting targets.” The banks are more conservatively disposed.

But even 6.4 percent is a respectable number, considering the state of the global economy. We could end the year a shade lower than China’s already diminished growth rate given that first quarter growth was boosted by non-recurrent electoral spending.

Standard Chartered notes that achieving the projected 6.4 percent GDP growth rate requires certain things. Foremost among these is that the new government must step out of the chronic fiscal underspending of the Aquino administration. Over the last six years, this chronic fiscal underspending made government a hindrance rather than a catalyst for higher growth.

Some economist will have to explain to us the fiscal mindset of the Aquino administration. It borrowed so much and yet spent so little. It would rather have a credit upgrade than spend on social goods such as new ports and roads that would have great multiplier effects on our economy. All these were done during a period where we saw the lowest interest rates and where government might have moved our economy to the next plane of growth.

Standard Chartered expressed optimism the Duterte government will focus on building direly needed infrastructure, particularly those that will address the looming power crisis in critical growth areas such as Mindanao. The infra program should also improve our agricultural performance. In the last quarter, our agriculture shrunk by over 4 percent --- effectively reining in the dynamism of the other economic sectors.

Our net external trade also declined by 5.5 percent. Fortunately, this was compensated for by an 11.8 percent growth in domestic consumer demand. Remittances from OFWs and revenues generated by our BPO sector drive the robust domestic demand.

If our exports did not decline as much as it did and had our agriculture been better managed, it is easy to imagine our first quarter growth rate could have exceeded 6.9 percent.

The market is encouraged by Duterte announcing infra spending will hit 5 percent of GDP, the accepted norm for investment in social goods by emerging economies. What will truly encourage investments in our economy is improving the ease of doing business.

Our red tape and obsolete procedures make it difficult to start up a business on our economy. If these procedures are modernized, corruption will decrease dramatically.

Duterte promised to reform the tax rates to unburden wage earners. While at it, he might as well push for lowering corporate tax rates that are currently among the highest in the region. Punitive corporate tax rates are a major disincentive to investments.

For an economy so dependent on BPOs, we have among the slowest internet speed and the highest cost in the world. Duterte warned the telecom service providers he will completely open up the local market to new players if they do not shape up.

The experts have suggested he should just go out and do it: building a national broadband network and opening segments of the telecoms industry to new entrants. That will improve efficiency and competitiveness immensely.

In sum, the financial institutions are not expecting any reversal of the growth path the Philippine economy traversed over the past decade. It is a growth path achieved through the hard work as we dug ourselves out of the debt crisis during the nineties and the consolidation of our fiscal position during the Arroyo years.

While the general economic policy architecture will be likely maintained by the incoming Duterte administration, some tweaking of policy will have to happen to make the growth truly inclusive. If economic inclusion demands it, some of the growth may be sacrificed in favor of greater equity.

There should be such a thing as “just growth.” President Duterte’s policy tinkerers should look at microeconomic (not just macroeconomic) solutions to poverty and the polarization of wealth.

Public anger over iniquitous growth played a large role in installing a Duterte presidency.