Federalism still Duterte priority, says Malacañang

By: Christine O. Avendaño, Julius N. Leonen, Leila B. Salaverria

Despite the fears of the government’s economic managers about the havoc a shift to
federalism could wreak on the Philippine economy, the change remains a priority for
President Duterte, Malacañang said on Thursday.

Presidential spokesperson Harry Roque said the whole Cabinet supported President
Duterte on the proposed change to federalism.

“I think there’s a hundred percent agreement that we are pushing for federalism. The
exact mechanics of how to do it well, no one can claim a monopoly,” Roque said.

Roque spoke a day after Finance Secretary Carlos Dominguez III and Socioeconomic
Planning Secretary Ernesto Pernia told the Senate finance committee that a shift to
federalism could damage the Philippines’ credit standing and disrupt the country’s
economic growth.

‘Political risk’

Answering questions from the senators who were scrutinizing the government’s P3.757-
trillion proposed budget for 2019, the two Cabinet officials said the draft federal
Constitution submitted by Malacañang’s consultative committee did not deal with
important issues that concerned the country’s economy.

At one point, Dominguez said the credit rating agencies viewed the proposed shift to
federalism as spelling “uncertainty” and “political risk” for the Philippines.

Dominguez said he found the draft Charter’s fiscal provisions confusing and the provision
for a 50-percent increase in the regions’ share from the national government’s tax
collections could make the government incur “a very large budget deficit.”

“So what will happen to our credit rating?” Sen. Ralph Recto asked Dominguez.

“Oh, it will go to hell,” Dominguez replied.

Pernia said the shift to federalism could directly cost the government P120 billion, not
including the cost of “disruption to projects and other things that would be [taken into
account].”

Maybe our growth momentum will be disrupted also,” he said.

Disappointing draft

The two officials, however, expressed no opposition to the proposed change to federalism
but they were clearly disappointed with how the draft Charter provided for the shift.

Dominguez said that based on the consultative committee’s draft, he would “absolutely”
vote against federalism.

Sack or shut them up

Roque said the Palace respected the views of Dominguez and Pernia, but added that he
wanted to know whether what the two Cabinet officials had said would be the results of
the change based on the draft Charter and whether there were alternatives.

He said Dominguez and Pernia had never raised the concerns they spoke about in the
Senate budget hearing at Cabinet meetings.

Roque said Dominguez, a close friend of the President’s, supported federalism and only
wanted “to find answers to unanswered questions” about the proposed change.

But Catholic priest Ranhilio Aquino, dean of San Beda College School of Law and a
member of the consultative committee, said that if President Duterte was really serious
about the shift to federalism, he should sack Dominguez and Pernia or tell them to keep
their mouths shut.

“If he [the President] favors federalism, let him sack Dominguez and Pernia or command
them to keep their traps shut,” Aquino said in a post on Facebook on Thursday.

“Freedom of expression does not apply to Cabinet officials in respect to policy,” he said.

If Mr. Duterte really wanted a change to federalism, he should tell Congress to “pass a
federal Constitution,” Aquino said.
“Let’s stop fooling ourselves. If Dominguez and Pernia, in their official capacities, speak
loudly against federalism, then the question should be asked in all earnestness whether
the President is for it or not,” he said.

“The way things are going, Dominguez and Pernia may merely be paving the way for a
subsequent presidential announcement that ‘I have been advised by my economists that
federalism is as bad for our national health as smoking is to a person,” he said.

Abandon ship

If Presidnt Duterte is now “cool” to federalism, Aquino said, the President should “give the
order to abandon the federalist ship.”

“Then all of us fools who wrote the draft and defended it with all our might will know that
we have been taken for a ride—for a very expensive ride—but we shall at least have the
chance to abandon ship before it is scuttled,” he said.

Aquino, however, said his statement did not reflect the view of the consultative committee.

No need to rush

In the Senate, Sen. Francis Pangilinan, chair of the committee on constitutional

amendments, said on Thursday that the concerns expressed by Dominguez and Pernia
to the finance committee showed that there was no need to rush the revision of the
Constitution for a change to federalism.

Speaking at a news forum, Pangilinan said the revision could be discussed after next
year’s midterm elections.

“The Charter change issue is no joke. It might result in a man-made calamity, both a
political and economic disaster,” Pangilinan said.

Pangilinan’s committee is hearing proposed amendments to the 1987 Constitution.

Economics is the social science that studies the production, distribution, and
consumption of goods and services.

Economics focuses on the behaviour and interactions of economic agents and how
economies work. Microeconomics analyzes basic elements in the economy, including
individual agents and markets, their interactions, and the outcomes of interactions.
Individual agents may include, for example, households, firms, buyers, and sellers.
Macroeconomics analyzes the entire economy (meaning aggregated production,
consumption, savings, and investment) and issues affecting it, including unemployment
of resources (labor, capital, and land), inflation, economic growth, and the public policies
that address these issues (monetary, fiscal, and other policies). See glossary of
economics.

Other broad distinctions within economics include those between positive economics,
describing "what is", and normative economics, advocating "what ought to be"; between
economic theory and applied economics; between rational and behavioural economics;
and between mainstream economics and heterodox economics.
High inflation, investment slowdown to drag growth
By: Daxim L. Lucas – Reporter

The Philippines is facing a perfect storm of economic woes, both from overseas and
within, that will cap growth next year, a foreign think tank said on Wednesday.

In a research note to its clients, Capital Economics said high inflation and a slowdown in
private investment would weigh down the local economy over the coming quarters.

“In contrast to the consensus, which is expecting growth to rebound next year, we think
[gross domestic product (GDP) growth] will slow to just 6 percent in 2019,” the think tank
said, citing the stubbornly high inflation as the country’s main economic challenge at
present.

“The main concern for policymakers is the recent surge in inflation which shot up to a
nine-year high of 6.7 percent in September,” it said.

“Higher oil prices, a weaker peso and disruption to food supplies from Typhoon
‘Mangkhut’ [Typhoon “Ompong”] mean inflation is likely to remain above the central
bank’s target until late 2019,” it added.

Capital Economics said it expected inflation to remain a drag on consumer spending for
some time to come.

Higher interest rates

In what some market watchers believe is a belated response to the sharp rise in inflation,
the Bangko Sentral ng Pilipinas has raised its key interest by a cumulative 150 basis
points, or 1.5 percentage points, the last of which was implemented just last month.

“With the [central] bank worried about inflation expectations becoming increasingly
unanchored, another 100 basis points of hikes are likely before the year is through,”
Capital Economics said.

Higher interest rates, meant to fight inflation, have the effect of making loans more
expensive. This makes it costlier for large companies and entrepreneurs to borrow funds
for expansion. It also makes existing loans more expensive.
All of these contribute to slower economic growth.

The Philippines is facing a perfect storm of economic woes, both from overseas and
within, that will cap growth next year, a foreign think tank said on Wednesday.

In a research note to its clients, Capital Economics said high inflation and a slowdown in
private investment would weigh down the local economy over the coming quarters.

“In contrast to the consensus, which is expecting growth to rebound next year, we think
[gross domestic product (GDP) growth] will slow to just 6 percent in 2019,” the think tank
said, citing the stubbornly high inflation as the country’s main economic challenge at
present.

inRead invented by Teads

“The main concern for policymakers is the recent surge in inflation which shot up to a
nine-year high of 6.7 percent in September,” it said.

“Higher oil prices, a weaker peso and disruption to food supplies from Typhoon
‘Mangkhut’ [Typhoon “Ompong”] mean inflation is likely to remain above the central
bank’s target until late 2019,” it added.

inRead invented by Teads

Capital Economics said it expected inflation to remain a drag on consumer spending for
some time to come.

Higher interest rates

In what some market watchers believe is a belated response to the sharp rise in inflation,
the Bangko Sentral ng Pilipinas has raised its key interest by a cumulative 150 basis
points, or 1.5 percentage points, the last of which was implemented just last month.

“With the [central] bank worried about inflation expectations becoming increasingly
unanchored, another 100 basis points of hikes are likely before the year is through,”
Capital Economics said.

Higher interest rates, meant to fight inflation, have the effect of making loans more
expensive. This makes it costlier for large companies and entrepreneurs to borrow funds
for expansion. It also makes existing loans more expensive.

All of these contribute to slower economic growth.

Capital Economics said another drag on growth would come from the weak export sector.

“Our forecasts for global growth are consistent with a further easing in external demand,”
the think tank said.

“Meanwhile, import growth is set to continue at a rapid pace, driven by the booming
demand for capital goods and raw materials to supply the government’s infrastructure
drive,” it added.

With exports set to weaken but imports likely to remain strong, the current account
deficit—the tally of the country’s trade-related dollar transactions with the rest of the
world—is likely to widen further, putting the peso under further pressure.

P58 to a US dollar

“We expect the peso to fall to P58 against the US dollar by the end of next year,” Capital
Economics predicted.

“A weak currency is a concern for the authorities because of the upward pressure it will
put on import prices,” it said.

Capital Economics also predicted that a slowdown in private investment would be a drag
on growth.

“President Duterte’s growing authoritarianism looks to be putting off many foreign

investors — the country has slipped down the league tables for political stability, and
pledges of new FDI [foreign direct investment] are near an all-time low,” it said.
What is 'Economics'
Economics is a social science concerned with the production, distribution and
consumption of goods and services. It studies how individuals, businesses, governments
and nations make choices on allocating resources to satisfy their wants and needs, and
tries to determine how these groups should organize and coordinate efforts to achieve
maximum output.

Economic analysis often progresses through deductive processes, much like

mathematical logic, where the implications of specific human activities are considered in
a "means-ends" framework.

Economics can generally be broken down into macroeconomics, which concentrates on

the behavior of the aggregate economy, and microeconomics, which focuses on
individual consumers.