Trading at the stock exchange appeared to flag Thursday after the announcement of our first quarter growth figure. But then the weaker performance tracked regional markets that in turn mirrored the slump in Wall Street after talk of impeaching Donald Trump broke out.
The official Q1 growth figure of 6.4 percent is not bad. But it was below consensus. In the preceding days, there was a constant drum roll about our growth hitting 7 percent – or even better. The economy grew at 6.6 percent in Q4 of 2016.
Growing at 6.4 percent, the Philippine economy ranks third behind India and China in all of Asia. That is more than decent. That is impressive. But we have set our goals a little higher.
As a matter of policy, we are targeting a growth rate of 7 percent of better. DuterteNomics is all about igniting a high growth rate through increased investments in our infra and human capital. A growth rate of 6.4 percent just doesn’t make the cut.
The “low” Q1 growth number is magnified by the fact that our agricultural sector, always our economy’s weakest link, grew by a respectable 4.9 percent from a -4.3 percent the year before. But that is due to favorable weather conditions more than anything else.
The two biggest culprits for lower-than-expected quarterly growth performance appear to be lower investments in industry and slack public construction.
A year ago, the industrial sector grew by a robust 9.3 percent. That softened to 6.1 percent early this year.
Public construction grew by only 2 percent the last quarter compared to the fabulous 38.5 percent growth rate posted the same period last year. NEDA Secretary Ernesto Pernia explains that public construction normally slows down during the first year of a new administration because of transition issues. He points out that in 2011, government consumption spending and public construction contracted -15 percent and -37 percent respectively. That contraction brought down our GDP performance rather dramatically at the onset of the Noynoy administration.
Business analysts, for their part, expect growth to pick up dramatically in the remaining three quarters of this year.
A key factor for this expectation is the passage of the comprehensive tax reform package. The first part of that package passed the committee level at the House of Representatives. The chamber looks to passing the bill by next month.
The tax reform package will provide government a robust and recurrent revenue stream. This will help underwrite the massive infra program in the works. It will likewise enable government to fund social programs in education and public health. To be sure, it will bring added public expenditure to bear on our economic growth.
It is important that the government agencies responsible for seeing the infra program through should work triple time. Our bureaucracy is notorious for taking too much time to get things done. The President must crack the whip to ensure the much touted infra program takes off. This program will create millions of jobs over the next few years.
With the plans in place, it should be easy to sustain a 7 percent growth rate into the medium term. That is if the President is willing to invest his vast political capital in getting the machinery of government moving on an ambitious but sound economic program.Wild card
For the global markets, Donald Trump has now become the wildest card in the deck.
Trump’s misadventures the past few days drove down the price of stocks at the New York exchange and, eventually, across the globe. Suddenly, it seems, the price of everything now depends on what scandal this man is going to inflict upon himself next.
Last Wednesday, the US Justice Department appointed former FBI Director Robert Mueller as special counsel. He is now in charge of the complex federal investigation into the extent Russia interfered with the last American elections. Much of that investigation involves the extent to which people associated with the Trump campaign met with Russian officials.
That investigation will necessarily cover Trump’s firing of FBI Director James Comey who was conducting his own investigation into the matter. Comey himself will be summoned to the congressional inquiry into the same subject. Many believe that Trump’s firing of Comey constitutes obstruction of justice, an impeachable offense.
Some American legislators have now called for the commencement of impeachment proceedings against Trump. The Mueller inquiry is necessarily trapped in trying to establish the commission of a crime. An impeachment proceeding, on the other hand, will be a broader discussion on Trump’s fitness to continue holding the post he was elected to.
This is an unprecedented situation. Trump defied convention by refusing to reveal his tax payments. He violates conflict of interest rules by continuing to hold on to his vast business empire. He makes policy decisions imperiously and fires career officials on a whim.
American voters were warned during the campaign that the US presidency is too serious to be entrusted to an emotionally immature and temperamental man. But the voters installed Trump anyway, for all his obvious flaws. Now we see how dangerous this could be. This man, if we need to be reminded, holds the codes to the most awesome nuclear arsenal on earth.
Mueller has an impeccable record as a public servant. His appointment was met with nearly universal approval. But Trump now calls the investigation to be led by Mueller to be nothing more than a “witch hunt.” That suggests the White House will dig in and refuse to cooperate with an investigation that is important for all Americans to see through.
Trump brought to the office unprecedented chaos.