​3 wishes for the economy in 2017

PHILIPPINES - In Brief 29 Dec 2016 by Romeo Bernardo

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1. Before the cock crows on January 28 to usher in the Year of the Rooster, the Finance Department's tax reform package would have been sponsored by the Ways and Means Committee Chairman in the House of Representatives where tax bills are supposed to originate. This would send a strong signal that the President is on top of his administration's economic priorities, give business greater confidence in an empowered economic team and assure markets that medium-term macroeconomic stability is not at risk. The proposed tax package to yield 1% of GDP in revenues is essential especially in light of the many newly added populist spending items in the 2017 budget, e.g., free college education, free healthcare, free irrigation. Resorting to reduced infrastructure spending to meet budget deficit targets is a far sub-optimal option, in our view, given that projected economic growth of 6-7% is hinged on accelerated public investments. More fundamentally, the dismal state of public infrastructure is dragging the economy's medium term growth potential. 2. Way before the term of BSP Governor Amando Tetangco ends midyear, a suitable successor, respected by the market, would have been named, assuming that the Governor is offered and declines a third term that would require a change in law. From the market's perspective, the ideal candidate would be someone who understands central banking, preferably an insider, in order to preserve the institution's independence and keep the conduct of monetary and exchange rate policy free from political interference. It would also quiet rising fears that the government would use the powers of the Anti-Money Laundering Council (AMLC) to look into bank ...