Reality check

It’s now starting to hurt. All assumptions about the cushioning effects of the personal income tax cut under TRAIN vis-à-vis inflation are now dropped. My realization came the other day as I reviewed the summary of my weekly gasoline and grocery expenses in my smartphone money app, the one I use to monitor personal expenses.

While the World Bank thinks that the country’s medium term economic growth outlook remains positive, it recently downgraded its growth estimate for the Philippines for 2018 to 6.5% from its earlier estimate of 6.7%.

Economists are aiming for at least 7% to 8% growth rate in order for economic expansion to have a positive effect on poor people. Otherwise, the real economic growth rate, which calculates GDP figures with inflation, could amount to nothing in the lives of ordinary Filipinos.

Of course, in economic terms, any fraction of a point matters because it has an impact not only on the lives of millions of poor people but also on young families who are just starting out and planning for the future. It matters to note that most voters in the 2019 elections, according to the Comelec, are young people.

With gradually more disappointing economic figures and some uncertainties surrounding the president’s health, the administration must work not just harder, but also smarter and sharper to ease the concerns of the public. There is no question about the president’s political acumen and decisiveness, even his charm and ability to connect with the masses. But those qualities amount to nothing good for the people if the president is incapable of political statesmanship.

Unfortunately, Duterte’s presidency is shaping up to be a gathering, not of the best minds who share the president’s vision, but of flatterers and yes-men – those who suck up to his tasteless jokes and penchant for going after his critics. I wonder if anyone in the president’s inner circle could say that the president is genuinely open to caution and candid advice from his own top officials.

Let’s take for example how the TRAIN or “Tax Reform for Acceleration and Inclusion” Law was proposed and pushed through legislation late last year. The president’s marching orders were clear: we need to shore up infrastructure quickly and ease the burden on the poor, but it takes more revenue to do that.

Whereas the past Aquino administration was known to have mainly tapped private investments through PPP or private-public partnership, the Duterte administration coined the more ambitious “Build, build, build” to be funded by increased revenue from tax reforms, and as usual, foreign borrowings including from China.

Some issues were raised then about TRAIN, the first package of tax reform proposed by the administration that will cut personal income tax but increase taxes on goods and services. The following were the statements coming from economic officials back then, as culled from newspaper reports: inflation could increase by only 0.85-1.2 percentage points in 2018, as we will hover between 2% to 4% inflation for the medium term; removal of quantitative restriction on rice could lead to lower domestic rice prices; new roads and transportation facilities will increase productivity and should reduce inflation; while lower personal income taxes will increase purchasing power that would stimulate economic activity.

None of that is happening now or about to happen in the near future. The stock market remains tepid while the peso is at its lowest in over a decade. (Mind you, the modest amount of money I placed in the stock market through an online broker have not recovered since Duterte replaced Aquino.) Political analysts are warning that if the people see that the government is not doing anything about the problem, that might be politically costly as we move towards the 2019 midterm elections.

It is said that the president is genuinely worried about inflation because it is affecting his political base, the poor people whose lives he has sworn to make better. Well, worrying is one thing, but not looking into his own failings as a leader and how this wrinkle of a rising inflation came to be makes it almost impossible for the president to deal with the ordinary people’s economic woes.

This should be a reality check for Malacañang. People are now starting to silently curse back at the man in the palace. And if the administration has still not woken up to what keeps it from fulfilling its campaign promises, then change has not really come and no change is coming.