US Eager to Engage with the PH, Think Tanks Urge Economic Prudence Following Elections

The United States is expecting to encounter initial challenges in bilateral relations with the Philippines, which is why it is pushing for early engagement as Ferdinand Marcos Jr. is slated to become the next president of the country based on partial polls. “Time will tell, but our desire will be to get off to a good start,” explained White House coordinator for the Indo-Pacific Kurt Campbell. “There are some historical considerations that probably (mean), at least initially, there will be some challenges in that communication.”

“But obviously, the Philippines plays such a critical important role and we will seek to continue close partnership in the security realm and increasing trade and economic ties. Our expectation is we’ll be able to continue to work closely,” Campbell continued, noting that the United States’ relationship with outgoing President Duterte picked up towards the latter end of his term and “at least the strategic level, and we want very much to continue that.”

The statement was made as U.S. President Joe Biden is expected to hold a summit with Southeast Asian countries, which the Philippines will not be able to attend particularly due to the transition. The Philippines has long been a treaty ally of the United States, but bilateral relations may become complicated as Marcos Jr. still has a contempt of court order with the District Court of Hawaii with regard to his refusal to pay the $2 billion plundered wealth of his father and former president Ferdinand Marcos.

Following the partial and unofficial results, Fitch Solutions has likewise raised the country’s Short-Term Political Risk Index Score from 64.0 to 66.5 out of 100. Oxford Economics, on the other hand, cautioned about potential credit downgrades and increased risk aversion for the Philippines should the new administration pursue expansionary deficit spending.

The UK-based think tank suggested that a balance must be struck between supporting the country’s economic recovery and containing the government’s growing debt load. Oxford Economics projects that 23.8% of this year’s gross domestic product (GDP) will most likely go to public spending.

“But the new administration could increase spending on items such as more cash handouts to reduce the rising cost of living facing households or tax relief, without any substantial revenue-generating policies or clarity over the path of medium-term fiscal consolidation,” it elaborated. Both think tanks, however, are expecting the continuation of some of the Duterte administration’s policies.

“This bodes well for the investment and construction outlook, despite the rising costs of construction,” explained Oxford Economics, noting the outgoing president’s “Build, Build, Build” infrastructure program. A similar sentiment was forwarded by Fitch Solutions forwarding that “Marcos is likely to continue to focus on infrastructure development on the economic front, while striving to maintain a delicate balancing act between the US and China in terms of foreign policy.”

Sources: Business Times, Manila Bulletin