Marcos 2.0: Year 2 to-dos

PHILIPPINES - In Brief 23 Jul 2023 by Romeo Bernardo

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When Ferdinand Marcos, Jr. assumed power at the end of June last year, we listed five areas where the new administration needed to take fire-fighting stances to speed up post-pandemic recovery. These were: (a) battling inflation and putting fiscal consolidation on more solid footing to ensure macroeconomic stability, (b) rebuilding private sector trust in long-term public-private partnership (PPP) contracts to expand financing sources for infrastructure, (c) addressing high food prices which the President drew attention to by appointing himself agriculture secretary, (d) crafting an exit plan for covid-19 to allow the economy to fully re-open and start addressing the pandemic’s scars especially on education and worker skills, and (e) addressing uncertainties in the power sector affecting the reliability and cost of electric power over the medium-term. Year 1 performance in brief There were hits and misses. Where the administration got it right from the start was to abandon lockdown as a policy to control covid. This unleashed unexpectedly large pent-up demand quickly that pushed last year’s GDP growth past most forecasts. Where it most evidently got it wrong was in managing food supplies. Skyrocketing prices of items that make up a tiny part of the consumer’s food basket (notably sugar and onions) generated outsized impacts on inflation at a time of already elevated global food and energy prices. Alongside a recovering economy, tight global financial conditions and volatile financial markets, it left monetary authorities with no choice but to raise interest rates aggressively and saw agriculture officials resorting to stopgaps in the form of food subsidies through a ne...