Neil Jerome Morales & Enrico Dela Cruz

MANILA (Reuters). Ferdinand Marcos Jr., the newly elected Philippine president will inherit an economic system that has clearly bounced back after the COVID-19 epidemic. But rising food and fuel prices will require urgent attention.

According to the government, Southeast Asia’s fifth-largest economic region grew 8.3% in its first quarter. This was a much better result than expected. The growth was faster than the 6.6% predicted in a Reuters poll. It also marked the largest annual increase since the June quarter 2021, when it grew 12.1%.

According to officials, the Philippines was the most rapidly growing country in East Asia Region during this time.

The economy expanded 1.9% from January to March on a seasonally adjusted base, thanks to domestic demand being supported by the removal of COVID-19 restraints and spending related to elections.

This gives the central bank the ability to increase interest rates in order to combat rising inflation. It could also dampen consumer confidence and slow down the recovery.

Karl Kendrick Chua, Economic Planning Secretary, stated that the economy is doing well as shown by Q1 data. The immediate priority was to reduce inflation, particularly those which most affect people, and that he did so at a press conference.

Some analysts see higher likelihood of an interest rate increase at the Bangko Sentral ng Pilipinas’ next policy meeting, which is scheduled for May 19.

Nicholas Mapa, senior economist with ING said that the GDP is now at pre-COVID levels. Inflation has been accelerating and we expect BSP will raise policy rates at its May 19 meeting.

Economists are concerned that the BSP which kept benchmark interest rates stable since November 2020 at record-lows could lose its way as central banks worldwide tighten monetary policy to combat inflation.

Governor Benjamin Diokno however has suggested a potential hike in June. However, the BSP will be looking at increasing rates 2 to 3 times to reduce inflation next year.

REFORMS AND FISCAL PUDENCE

Chua called on the next administration, to continue the momentum of growth, to implement further tax reforms and to maintain fiscal prudence. Chua also encouraged the increase in tax revenue needed for infrastructure and human capital development.

Marcos needs to boost tax revenue as he must address the issue of excessive public debt, which is bloated from heavy borrowings that finance government pandemic actions.

Mapa from ING stated that Marcos can get a majority mandate, on top of large political capital, to make substantial economic reforms in his six-year tenure.

Marcos won a clear victory on Monday and said that he will run for president. He was also looking at potential candidates to his economic team. Marcos’ priorities are infrastructure, jobs, and energy prices.

Chua stated that another pressing concern is the need for more face-to-face education as schools reopen. This will pose a major challenge to the education department. She said she would be working under Sara Duterte Carpio (daughter of the president).

During 20 months of online education, students have experienced setbacks because of a lack of internet access and a patchy connection.