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July 24, 2020

Asia

PHILIPPINES: Duterte’s policy speech on Monday – curb your expectations (again)

BY Bob Herrera-Lim

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( 5 mins)
  • President Rodrigo Duterte will supposedly present his “roadmap to recovery” on 27 July.
  • However, he is unlikely to deviate from the limited stimulus being advocated by his economic team, or radically reshape his administration’s other healthcare policies.
  • A potential curve ball is that he could revive plans for constitutional change, but this would be a distraction with a limited shelf life.

President Rodrigo Duterte will make his annual policy speech on Monday, 27 July, to mark the start of his fifth and penultimate year. Called the state of the nation address (SONA), it will be delivered before a joint session of Congress.

Duterte has struggled with the pandemic

In his four previous annual speeches, the president highlighted his law-and-order agenda, especially against the drug trade and corruption. After all, it was his image as an anti-crime enforcer and city administrator that propelled him to the presidency in 2016, and which has helped sustain his approval ratings despite his controversial policies. More recently, he has included the communist New People’s Army and those he has tagged as being the country’s oligarchs as among his government’s enemies.

But the pandemic has been a difficult one for Duterte. He swung away from his dismissive stance in February, but for the most part he has struggled to find his political bearings — especially the bravado that he had used to brush away criticism of his anti-drug war. The Philippines’ Covid-19 numbers are nowhere near those of the worst-hit countries, but public fear remains high because of the weak health infrastructure and government’s poor messaging and management of public expectations. His administration faces criticism on a range of issues, from its slow ramp up of contact tracing and testing to the limited help available to the poorest and small businesses. Congress’ decision to focus on shutting down the country’s largest TV and broadcast network may have played well to the president’s supporters but it has only deepened polarization with his opponents and may still have adverse consequences for the election season.

The administration will therefore try to use next week’s SONA to regain some momentum. Refocusing on the drug war is unlikely. Also, Duterte has no real plan for going after the country’s oligarchs despite his claimed success; thus, any further attacks on the private sector will be opportunistic rather than part a deliberately laid out plan. The presidential spokesperson has instead stated that his Monday speech will instead focus on a “roadmap to recovery.” Whether there will be new proposals that could surprise markets or significantly increase confidence is doubtful, however.

No major surprises expected

A briefing by the government’s economic team on 10 July signaled that both the scope and size of the policy response generally remains the same. The Philippines fiscal stimulus is approximately 2% of GDP, which is the smallest among the larger Southeast Asian economies. The lower house of Congress has approved a bill providing for a 6% – 7% stimulus, but the key economic policymakers in the executive calls it “unfundable” and are therefore unlikely to support its approval by the Senate.

There are no signs of any major initiative being introduced that would significantly raise expectations that healthcare issues related to Covid-19 will be resolved more quickly. The outbreak continues despite the country having implemented some of the most stringent and long-lasting restrictions on movement and business activities globally. In fact, there is speculation in Manila that the government may reimpose the shelter-at-home rules called the enhanced community quarantine (ECQ) because of the sustained diagnoses of new cases and the decreasing Covid-19 and ICU capacity in many metropolitan hospitals. There may be additional funding announced for Philhealth, which is the national healthcare insurance system.

However, Duterte’s senior economic policymakers and the business community are against another broad ECQ regime due to the pain that it would again inflict on the economy. Anecdotally, although many movement restrictions were eased in June, retail foot traffic is still only a fraction of what it was before the pandemic and consumer confidence remains weak.

Thus, targeted and local restrictions are more likely, and the government will attempt to convince hospitals to allocate more of their beds for Covid-19 to ease the perceived shortage. The probability of the ECQ being reinstated will increase, however, should the higher Covid-19 capacity threaten to become inadequate; this risk will therefore have to be watched for a few weeks more.

Constitutional change would be a distraction with limited value

The potential curve ball being discussed in Manila is that he possibly could revive his plans for constitutional change, as a way of further rallying his supporters and distracting the country from the economic difficulties that still lie ahead. An organization of pro- Duterte mayors last week openly called for this, supposedly to institutionalize a revenue sharing measure and to open the economy even more to foreign investors. Regardless of the motive for constitutional change, initiating the process now would be a risky move. Finance Secretary Carlos Dominguez wants Congress to first approve delayed tax reform legislation, designated as CREATE, that would cut corporate income taxes and streamline the fragmented process for the granting of business incentives. And then the House needs to start tackling the 2021 budget.

Therefore, constitutional change, which entails the significant use of political capital by both the executive and the legislature, would be distracting to these processes, which is why Dominguez would likely be against doing it this year. Assuming Duterte decides to push it, his effective window would therefore be at the start of 2021, which would only be a year before the start of the 2022 election season—a tight schedule for a president who may be losing his political clout as the virus does its damage to the economy this year.

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