Dominguez tells Moody's execs: Ignore political noise
MANILA, Philippines – Finance Secretary Carlos Dominguez III urged executives of international credit rater Moody’s Investor Service not to be distracted by President Rodrigo Duterte’s tough talk, as the country’s economic team remains “fully engaged” in implementing the government's 10-point socioeconomic agenda.
“If you talk about the political noise, yes, there is. It’s inevitable for someone who’s shaking up the tree. It’s inevitable because of the personality of the President and people not used to this type of governance," Dominguez said in a meeting with Moody's executives.
"But he’s fully engaged in [the administration’s] economic agenda," he assured them. (READ: IN NUMBERS: The Philippines' 'war on drugs')
Moody’s executives who attended the meeting included Christian de Guzman, vice president and senior credit officer; Atsi Sheth, managing director; and Matthew Circosta, associate analyst of the Sovereign Risk Group.
Dominguez told Moody’s executives that the Duterte administration would carry out its inclusive growth agenda, while building on the economic gains of the past administrations and exercising fiscal responsibility. (READ: Duterte's tough talk and what it could mean for US, EU investments)
Moody’s currently rates the Philippines as Baa2, an investment grade rating with a stable outlook.
This credit rating is higher than what Moody’s has given Vietnam and India.
The government's assurance to the credit-rating agency comes a few weeks after Standard & Poor's maintained its stable outlook for the Philippines, but highlighted a range of "weaknesses" under the new Duterte administration that also included his foreign policy and national security statements. (READ: Philippines' crime war a risk for economy – ratings agency)
Since he became president, Duterte has attacked some foreign governments and international bodies and leaders for calling his attention to the spate of killings linked to his war on drugs. Among those at the receiving end of his tirades and curses are US President Barack Obama, the US government, the United Nations, UN Secretary General Ban Ki-Moon, and the European Union.
Former president Fidel Ramos had rebuked Duterte for such rants, as well as for pursuing a foreign policy that seeks closer alliances with China and Russia, but cooler relations with the Philippines' oldest and most powerful ally, the US.
Dominguez informed the Moody’s executives that Duterte has been meeting with congressional leaders to push a key component of his 10-point socioeconomic agenda, which is the overhaul of the tax system by introducing sweeping reforms in tax policy and administration.
The first component of the tax reform plan was already submitted to Congress on September 26. (READ: Poor to be shielded from fuel excise tax increase – DOF)
DOF said this aims to ease the tax burden on wage earners and the middle class while protecting the country’s vulnerable sectors and raising enough revenues to accelerate spending on infrastructure, human capital, social protection, and agricultural modernization.
Dominguez told the Moody’s executives that the next thing Duterte plans to do is to hold consultations with mayors, governors, and other local chief executives “to basically hear what they want, and to tell them what we want."
"What we want is no corruption and no crime," the Cabinet official said.
Duterte’s ultimate goal is to bring down the poverty rate to 17% from 26% by the time he steps down in 2022.
Dominguez said the Duterte administration’s seemingly ambitious goals are doable as the Philippine economy is now in a “Goldilocks moment.”
A Goldilocks economy refers to one that – like the preferred temperature of the character of the same name in the children's story, Goldilocks and the 3 Bears – is neither too hot nor too cold. It is an economy marked by a low inflation and interest rates, and steady economic growth.
The Philippines is currently enjoying excess liquidity in the market, a low real interest rate of only 1.8%, a low inflation rate, low borrowing costs, and a domestic currency that is currently good for exports.
Dominguez said these positive factors allow the government to increase its deficit spending to 3% from 2% of the gross domestic product (GDP). – Rappler.com