Is Duterte the reason for the Philippines economic success?

FROM an economic position, it is hard to state whether President Duterte is the reason or not for the continued stimulus of 6% GDP growth. 

Capital Economics website estimated that the economy grew around 6.5 percent year-over-year in the second quarter. If sustained we will be leading the rest of South East Asia. 

 

Hot Money

What is fair to say about his involvement?  The first hint is the amount of Hot Money coming back to the Philippines.  

Yes, when President Duterte took office, hot money was at a deficit. More investments were being liquidated than arriving.  

According to the Bangko Sentral, a booked net inflow of foreign investments or Hot Money amounted to $51.49 million in April. 

This might be a complete reversal of an outflow deficit trend.  There was a $354.05 million net outflow recorded in the same month last year and the $459.86 million outflow in March.  

This abrupt stop to the bleeding is eye opening. Hot Money also continued to grow after President Duterte’s SONA. 

The proposal of our country’s future infrastructure spending sounds great to global investment funds. This very public commitment for interior improvements resulted in a net inflow of $219.91 million.  

He is consistent in his message that corruption in the public office will have no place in his government.  This vision alone is a welcome sight to investors.  

They do not want to traverse the pervasive practices of local bribes and illegal commissions. An employee of Warren Buffet’s power division has stated they have all but given up here due to the graft.

We can also see that inflation targets remained the same. The country’s inflation has not gone above the Central Banks target of 3%.  

It currently sits at an estimated 2.8%. Although citizens might be seeing a rise in chicken prices, food and oil are not counted in the final tally due to volatility. 

 

Avian Flu 

In the case of chicken and eggs, that price is impacted by the Avian Flu finding in Pampanga Province. 

Chickens were already an asset hard to raise due to the importation need for feeds. 

Now an estimated two hundred thousand birds will be voluntarily killed to prevent the Avian Flu from spreading to other provinces. If this does not work, be prepared for higher prices in everything that uses chickens and especially eggs. 

Eggs are the concrete of most culinary cooking including baked goods and hamburger patties.

 

Trade Deficit

The trade deficit is concerning but not an immediate issue. In general terms, spending on infrastructure when the Philippines itself lacks the capability of making steel will be a strong cause of an even bigger Trade Deficit.

Have no doubt, we do needan infrastructure across the Philippines or our products, and food will not be competitively priced enough to sell overseas. 

Thankfully exports rose 0.8 percent from a year earlier while imports fell 2.5 percent. That is a 2.15 billion USD gap verses 2.74 billion gap in 2006. 

Another causality is when a population improves its annual income, and a large middle class evolves, then more imports will certainly occur.  

This is not horrible.  What is bad is a continued lack of self-support in commodities such as Finished Goods. 

Almost every successful country has abilities to manufacture cars, heavy equipment, and enhanced steel. One step at a time though. 

Let’s first make the infrastructure that provides freight and energy to future manufacturing industries.

 

Lower Peso

The lower peso is a concern but not as much as you would think.  Given the deficit and hot money scenarios, it is now cheaper for businesses to invest in more BPO’s, manufacturing, and building developments with the new lower peso. 

It will be expensive to purchase manufactured goods from foreign countries. I expect to see prices of cars, international restaurant food, and liquor to go up.  

The upside is that local products will now have the advantage over many import rivals. Please order me a San Mig with that Fish Sinigang.

I do have a slight concern. Recently the president signed a Free Tuition Bill for all state-owned colleges. 

Being a socialist isn’t necessarily bad. Just do not use countries from South America and Greece as an example.  

Canada, England, Germany, and France are socialist and have been consistently a powerhouse in global economics for over 50 years. I don’t see this new socialism as a bad status. 

Unfortunately, it requires monitoring of government spending.  Corruption found in Venezuela, Columbia, and Greece can cause tampering and government spend eventually went into personal pockets. 

This has caused their governments demise. Can Duterte put into place the ability for the “no-name” families of the Philippines to get their kids accepted into these state colleges? 

The affluent already use alumni influence or send their kids abroad. This would further cause a clog in the higher education pipe for the poor if not closely monitored.

The government paying for an education that affluent people can already afford isn’t the intent, but I feel that might be the impact.

 

Stage for Better Government

Overall, I believe President Duterte has been setting the stage for a better government. 

Whether the marketing of this anti-graft government is fact or fiction, reality versus hope, or a new vision versus an old spin, only time can reveal. 

Duterte is the current sitting president, and he deserves better than the critics at hand. 

I for one will give him the benefit of the doubt. He has not wrecked the economy, and that is a fact. We will need a passage of time to reveal the rest.  

 

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