The economy and the next president

With just one week to go, the campaign frenzy for president has gone high stakes. With one candidate as front-runner (Duterte), there are three candidates chasing (Roxas, Poe and Binay), according to voter preference polls.

The chasers, of course, hope they can overtake the leader and create an electoral upset. To gain hearing and advantage, the visceral attacks have gone personal against the front-runner.

The short-run prediction for the economy. Just two days ago, the World Bank released its assessment of regional economic growth in Asia. It said that among the large developing Southeast Asian economies, the Philippines and Vietnam have the strongest growth prospects, with both countries expected to grow more than six percent in 2016.

In reference to the Philippines, the forecast of strong private consumption and election spending this year will mean a growth of 6.4 percent and that, the next year, this growth would slightly temper down to 6.2 percent.

Such predictions are based on fundamentals that are vetted on existing economic policies.

In short and in general, any change in political leadership that happens during ordinary times – this year of 2016 is happening free of sharp economic shocks or crises – is not likely to produce dramatic effects.

Given current world economic conditions, which continue to be generally unfavorable, the growth rates thus cited are among the highest the World Bank anticipates for countries in the Asian region. (Where goes such predictions, in general we get a chorus of supporting assessments elsewhere.)

The most dynamic region in the world economy is still Asia. China’s expansion, which is on a continuous path toward lower growth rates is still higher than these numbers but lower than seven percent.

Leadership change and economic fundamentals. Though euphoria and new mood could result from a change of leadership, new economic policies or directions cannot happen overnight. They take place only when the new leader takes over the budget process and directs the legislative program that leads to the change in policies.

Even the stock market, which is often the bellwether for signals of change, would likely remain tame with respect to this change. By its nature, the stock market will continue to be as volatile as before. The forces that drive its fluctuations depend more on larger international factors and day-to-day events that drive business decisions.

Of course, expectations about who might win the election could lead to certain hesitation in investment decision-making among economic actors. But overall assessments on prospects of the economy based on its fundamental strengths would likely determine how those investment commitments are made.

Debate on economic policy. The presidential debates and most candidate speeches on economic policy have been rather tame with no sharp divides in economic policy among the candidates.

The confrontational presidential debates did not bring out such differences, if any, at all. The moderators failed to sharpen the discussion, or the candidates all veered toward generalities, soundbites, and populist statements.

Hence, there were promises of large employment generation without specifying the quality and substance of those jobs. There were statements of support for poverty alleviation through economic development and direct subsidies for the support of the poor. All promised expansion of the “pantawid pamilyang Pilipino program” (4Ps), which has already been a large budgetary cash outlay to help the poor.

Most of the candidates (except Duterte) tried to emphasize the need for programs that feature government giveaways, either in the form of tax reductions or incentives or the expansion of public expenditure programs. Hardly any candidate spoke of how to raise resources to finance these programs.

Raising private investments is a major issue in the economy. But this did not get fully elaborated by the candidates. Here is an issue with many possibilities for detecting different economic approaches.

One issue that has attracted considerable attention is that on “labor contractualization,” a current feature of labor market practices. Duterte brought this out early in the campaign, and this issue attracted wide support and commentary, especially on May 1, Labor Day.

My Crossroads column (“Contractualization of labor as 2016 election issue,” Philippine Star, Dec. 16) dealt with the subject. Labor contractualization as a practice could be eliminated with both labor and business benefiting from it, if the labor market is made flexible. (This means the following: labor laws should find easier ways to lay-off workers and to remove protection clauses for regularization of employment after six months of work. Immoderate labor welfare standards, including unrealistically high minimum wages for entry into employment, have produced high unemployment rates in the country and caused us to fall behind other industrializing countries in East Asia.)

The economic platforms of the candidates spoke about amending the restrictive provisions of the constitution to attract more foreign direct investments in the case of Poe and Binay. The Roxas position, following President Aquino is to ignore this important issue.

An area of investment promotion that could have brought out major implications on how the country could meet the deficiency in private investments did not get debated much.

All three candidates chasing the front-runner (Roxas, Poe and Binay) have elaborate economic programs in their election platforms.

Duterte, the front-runner, in a self-deprecating way, admits to not being bright and that he is used to copying. So, he would copy the good economic programs of his opponents.

What happens next? Unless last minute changes in voter preferences for candidates happens on election day, it would seem in this year’s elections, the electorate is hankering for a leadership change that is drastic.

The electorate appears to demand for stronger and decisive leadership by the president in the area of crime, petty police corruption, drug lords and big corruption, and to make a strong statement of securing public safety.

In this context, the big economic issues confronting the nation takes a back seat. However, that does not mean the next president needs to neglect the important issues the nation confronts in matters of economy.

The same big problems will continue to haunt the economy – how to achieve growth and to raise resources to further sustain it, how to generate employment and transform jobs into higher quality, how to speed up infrastructure, and how to promote competition and efficiency.

Then there is still the challenge of catching up with our neighbors in economic performance, the strengthening of our position within the ASEAN market, and raising our profile in the world at large.

My email is: [email protected]. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/