Who’s really in charge of the economy?

Finance Secretary Carlo Dominguez, Socioeconomic Planning Secretary Ernesto Pernia, and Budget Secretary Benjamin Diokno. [Photo source: ABSCBN News]

By Andrew Lim

How is economic policy made in the Duterte regime?

It’s a legitimate question to ask in these times of deteriorating economic indicators and the weak, unorganized responses we get from the economic managers. Who’s really in charge, and how is economic policy formed in this government?

We’ve discussed in previous blog posts Duterte’s incompetence in economic matters, and makes no effort to hide it. In fact, he even highlights (or rather, “ lowlights”) his lack of understanding by proposing nonsensical things like reverting to barter trade to combat inflation, land reform in Boracay, revival of the steel industry, blaming Trump for inflation, etc.

There is an economic cluster in the Cabinet composed of the chiefs of Finance (chair), Budget, NEDA, Trade, Public Works, Transportation, Communication, Tourism, Agriculture, Energy, Local Government, Science and Technology.
We ask: How is policy made by committee? How are differences ironed out? Who has the loudest voice? How is it insulated from vested interests, a problem during the Estrada administration?

Imagine a cabinet meeting with economic items on the agenda: who leads the meeting? Does the president have any inputs? Does he participate? Or does he just ask “ o, ano na napagkasunduan niyo? “

In my view, there is a lack of an over-arching, single voice of wisdom due to the President’s incompetence on the subject.

After all the number-crunching and statistical modeling, there are difficult decisions to be made at the highest level, where wisdom is most needed.

How can you rely on someone who thinks the Marcos era was one of prosperity when it had the highest inflation rates ever at 50%, when GDP became negative and peso value plummeted from P8 to P18 vs the dollar? We lost two decades of development during that period!

Is this a case of “ you do the academics, I do the bullying?” arrangement? Remember your school days when the class geniuses were protected from other bullies by the biggest bully in exchange for doing his assignments?
To be fair, the President appointed people with credentials, and the choice for Central Bank governor was a good one – an experienced insider, not a PDP-Laban ideologue.  But do they have balls?  This was a major problem in Marcos’ time.

The economic managers did a good job questioning federalism – the project was ideologically driven, and had no hard numbers to justify it. If there’s any study that drives a stake into the heart of pro-federalists who argue economic development it is this:

And as far as I can tell, they are not fronting for any vested interests. Or are they?

Lastly, as we pointed out last time, you cannot separate the economic from the political. Duterte’s decisions on the political side inevitably impact on the economy. Aid and sale of equipment is withdrawn due to public backlash on the extra-judicial killings. Duterte’s subservient and defeatist position on the West Phil Sea affects our supply of fish, contributing further to inflation. And his continued support of the Marcoses makes the global community and foreign investors think twice, since it does not have the ignorance and amnesia of Filipinos.

The Filipino people deserve better than this.

Iniwan ng maayos, ngayon ay busabos.

 

Comments
25 Responses to “Who’s really in charge of the economy?”
  1. Albert Jan Santillana says:

    I believe the Chinese government is in charge of our economy. Dangling their loans to choose which projects to give their prefered Chinese firms.

  2. karlgarcia says:

    It is a good thing that Israel trip happened, we found out that we have amnesia and delusions that others have amnesia too.
    He suddenly backtracked on Obama after cursing him, he backslid on Comparing himself to Hitler, I wonder if he goes to Mexico he would pretend that he never badmouthed them.

    His position is where words and lives matter, and he must realise that soon enough.
    But if we ourselves remained “ satisfied” with the drug war even if others are noticing us then we have a big problem.

    As to our economy, almost all of them have lousy economic and managerial background.
    FVR has managerial experience, GMA too , but the rest have no background in economics.

    But combine ignorance with dictatorship( at least FM had brains) and it is a recipe for disaster and we are in a disaster area.

    We must learn from all of these ASAP, so are we slow learners, or what?

  3. arlene says:

    “Iniwan ng maayos, ngayon ay busabos’. That’s precisely where we are now. Does Duterte even care about our dwindling economy? Sad to say, he knows nothing about it. He blames anyone but himself.

  4. Another bad news on the economic front. The first budget deficit in 9 years. Ubos na ang surplus na iniwan ni PNoy. All those trips abroad and the promised ROI, when are we going to start seeing it?

    https://www.philstar.com/business/2018/09/24/1854340/govt-posts-first-august-deficit-9-years

    • Thanks. I tend to think that the foot is to the spending floorboard to pump up GDP.

      • True. In moderation, there is nothing wrong with a budget deficit. It increases economic growth and creates a strong economy. But what I see is a lot of discretionary spending (trips abroad and inflated intel and confidential expenses of the Executive, secret squirrel pork and the likes) resulting in debts which may get out of control, which may scare investors, which may raise the interest rates, which may slow growth as an end result.

  5. madlanglupa says:

    The first idea that came to me upon reading the title was GMA, regarded by some as an economic genius.

    How ironic that this regime, perhaps her masterpiece that set her free, and now her brain power is being spent on re-consolidating political power, while the supposed economic mandarins just stood by and talked otherwise as inflation is growing by the day.

  6. karlgarcia says:

    Are we headed for a ratings downgrade?
    If EJKs and TRAIN/Trabaho turn off investors; If we shift to federalism, then Moody’s will be in a bad mood.
    ———
    Risks

    According to Moody’s, the Philippines’ credit rating would likely be downgraded if macroeconomic stability were to be threatened by “unabated” overheating pressures.

    Moody’s also warned that Philippine President Rodrigo Duterte’s contentious policies on law and order over the past two years, as well as other political controversies, may have a “negative impact” on the Philippines’ attractiveness to investors.

    The credit rater likewise expressed concern over the recent Supreme Court ruling that increases the share of local government units’ internal revenue allotments and the proposed shift to a federal form of government, saying such changes could have “negative implications for public finances.”

    Read more at https://www.philstar.com/business/2018/07/20/1835256/moodys-keeps-philippines-investment-grade-warns-downgrade-risks#pV0HXVuEPP4rwxYL.99

  7. karlgarcia says:

    The ones in charge are telling not to panick, let us see what happens after Sept 27 aside from raising interest rates by another 50 basis points.
    ——-

    https://www.bworldonline.com/no-reason-to-panic-over-inflation-economic-managers-say/

    ECONOMIC managers said current inflationary conditions do not amount to a “major” crisis and added that they are confident that an Executive Order expected in the next few weeks will stabilize prices by next month.

    “We are not in a major crisis. It may be a serious problem for some people, but for the nation in general it’s not a major crisis,” Finance Secretary Carlos G. Dominguez III told reporters yesterday at the Senate.

    Senator Loren B. Legarda, who chairs the Senate committee on Finance, sought a briefing on inflation from economic managers on Friday amid ongoing budget hearings.

    Consumer prices rose 6.4% year-on-year in August from 5.7% a month earlier and 2.6% a year earlier. Inflation averaged 4.8% in the first eight months of the year, well above the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range.

    Asked whether inflation will have any impact on the proposed 2019 budget, Mr. Dominguez said: “I don’t think so.”

    “We have a lot of tools that are available to us… monetary and non-monetary tools,” he added.

    The economic managers recommended inflation-mitigating measures to President Rodrigo R. Duterte, who is expected to sign an Executive Order this month to implement them.

    These include the immediate release of 4.6 million sacks of rice from National Food Authority (NFA) warehouses, authorizing the NFA Council to import five million sacks of rice to arrive next month and another five million early next year; streamlining the licensing procedures for NFA rice imports; facilitating the distribution of imported fish to wet markets; the formation of teams of law enforcement officers and farmer groups to monitor the transport of rice from ports to NFA warehouses to retail outlets; providing cold storage for chicken; setting up outlets where growers can offer their produce directly; and the expedited release of essential food items from ports.

    The economic managers are also banking on the immediate passage of the Rice Tariffication bill that would liberalize private importation of the staple grain.

    Mr. Dominguez, who sits on the central bank’s Monetary Board, also said the board, which sets rates, will not be holding any emergency meetings ahead of the scheduled gathering on Sept. 27.

    “It was decided that there will be no off-cycle (meeting). You really think we are panicking? You are panicking, not us. That’s why you have to have perspective,” he said.

    Budget Secretary Benjamin E. Diokno meanwhile told reporters separately that once the measures are implemented, inflation could return to the 2-4% target range as early as the fourth quarter.

    He said that fish, rice, meat, and vegetables accounted for 2.4 percentage points of the 6.4% headline rate in August.

    “We have drafted administrative measures which the President is studying… (Prices will) normalize. We feel that it will normalize in the fourth quarter and then we’ll be back to the 2-4% range by next year. It will be reduced by 2.4 points… most likely by the last quarter,” he said.

    “We are confident that it will go back to that, especially if oil prices normalize,” added Mr. Diokno.

    “People are characterizing it as runaway inflation. To me that’s irresponsible. Runaway inflation means no one is in control… where even the central monetary authorities have no handle of what’s going on.”

    Mr. Dominguez added: “You have to take a long view of inflation. When you take the long view, you will realize that we are the administration with the second-lowest peak inflation rate since Cory (Aquino). You have to take a long view. Not every bump you are going to take is going to be a major crisis.”

    They presented government data indicating that President Corazon C. Aquino’s government experienced peak inflation of 21.2% in August 1991, followed by 13.9% in February 1994 under the Ramos administration; 10.7% in January 1999 for the Estrada administration; 10.5% in August 2008 for the Arroyo administration; and 5.2% in October 2011 for the government of Benigno S.C. Aquino III.

    Mr. Diokno added: “We have seen higher inflation in the past. It’s irresponsible to characterize what’s happening as runaway inflation. Let’s not panic.”

    ——
    Don’t mind if we just increase our interest rates by another 50 basis points.
    No worries.

    https://www.bworldonline.com/bsp-likely-to-raise-rates-by-another-50-bps/

    ======

    What does Duterte say ?

    Blame the trade war!
    Blame oil prices!

    He has a point, a pointing finger.

  8. The boss anywhere doesn’t need to be an expert in everything: he just needs to be able to distill the inputs of specialists and managers below him, see the big picture then decide to “make it so” like Captain Picard. FVR as a former general will have had that capability.

    Don’t know about PNoy, but he did have an attribute the rich have worldwide: thrift. That and letting experts do their job was enough.

    Duterte acts like a kanto boy given money: spend it, we have it, then lend more. Just the 3.8 trillion budget as opposed to PNoys 3 T.

    • edgar lores says:

      *******
      I wonder how Christmas is shaping up for the D and E classes.

      Will there be enough food on the table? Will there be enough income to buy gifts? Will Bong Go play Santa?
      *****

    • chemrock says:

      Bosses don’t need to be an expert in everything, true. But he needs to have wisdom and world views good enough to distill all the info flows coming from his team of experts to make right decisions. I mean he ought to be smart enough to stop anyone selling him snake oils. If he acts on the say so of a solgen to act illegally against someone who is investigating him (the solgen) he ought to have the wisdom to say hold on, something is fishy here.

      • In Davao, Duterte’s methods worked. He was mentally too inflexible to grasp the national game and its higher complexity.

        Of course he also wanted to destroy Trillanes, who plays in a bigger league.

        • It is of course also naive to think that one can budget like there was no tomorrow – and delegate econ.

          Or think erratic and unstable acts don’t affect trust, which is the most valuable capital of all.

          So the idea of Duterte “you do the economics I spend the money” was bull from the very beginning.

  9. Andres 2018. says:

    PDuterte admits that he doest know anything about economics, even before he was elected as the president. Whos in charge then? GMA.

  10. OOT: TRC 150 orders arrest of SenTri. No available info on what basis at this time as it is a developing news.

    https://news.abs-cbn.com/news/09/25/18/court-orders-trillanes-arrest

  11. madlanglupa says:

    Sorry to cut in, but they just got a warrant.

  12. Willie Rosacia says:

    In the face of the down-spiraling trend in the economy and with no viable solution in sight, one might wonder if our economic managers would set aside their egos and revisit the economic policy of P-Noy’s “Daang Matuwid”. In the first place, the president has said in the early days of his presidency that P-Noy’s economic program was working very well, catapulting the country at the time as the emerging tiger in Asia. Mr. Duterte was right. He may not be the economist that we wanted him to be, but he had the humility to recognize (by sheer instinct?) there was no need to fix “Matuwid” because it was not broken!
    No idea how to fix it? Consult former Sec. Abad and his team, or maybe P-Noy and Mar Roxas😜❗️

    • Yes, it was like the admin recognized the stability and achievements of the Aquino years and then set out to discredit or steal credit for the achievements and refuse to recognize the main overlay from the Duterte years is not build build build but the instability that has chased investors away. I did note that Sec Dominguez did say the other day that the reserves that had been built up under Aquino were advantageous and allowed the current government to deal with the short term disruptions now being faced.

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