While the domestic and global economies are on a more stable path to recovery, the next Philippine President will need to address ballooning debt and more expensive loans while dealing with rising inflation and possible new virus variants, according to the country's economic strategist.
Jonathan Ravelas, Chief Market Strategist of the country’s largest lender BDO Unibank, said that whoever wins the elections the first 100 days for the new administration will be critical while “picking the right people for the job (economic manager) is more important than developing a strategy.”
”What we need is a captain who will bring us out of the storm. The next leader must be able to address the economic and social crises we are confronting, to put us back on the path of faster growth. How our markets will perform will depend greatly on that,” he explained.
Ravelas cited a Bloomberg poll showing that Vice President Leni Robredo getting the highest score from investors and analysts to emerge “as their top pick to oversee an economic rebound” while finding that Ferdinand Marcos Jr.’s platform lacks clarity.
“Market participants are still looking on candidates’ plan on taxes, incentives, infrastructure spending, and foreign investments,” he added.
In addition, Ravelas said the foreign policy of the next administration will also be closely watched, noting the outgoing President Duterte has fostered closer ties to China but restored a key military deal with the United States.
He said the next President should start by focusing the social, health and economic fronts by strengthening public institutions and equality, accelerate vaccine rollout to improve mobility, control inflation and “bolster domestic revenue mobilization to rebuild fiscal buffers and address debt sustainability concerns.”
As far as the stock market is concerned, Ravelas said that, historically, the PSEi has gone up after elections because the polls have always been peaceful and the transition to the next administration has always been smooth.
The assumption of a new president has led the PSEi to rise on the next 12 months since 1998. After an initial plunge, even the first year of the Estrada administration saw the PSEi rise by 14.82 percent.
The biggest 12-month gain after the elections were made during the term of the late President Benigno Aquino at 36.95 percent, followed by President Gloria Arroyo with 24.24 percent. The lowest growth was recorded during the term of President Duterte at 13.32 percent.
For this year, Ravelas said the PSEi could reach the 7,800 level, boosted by factors such as the further reopening of the economy, low Covid infection cases, and government spending.
He added that, peaceful elections combined with better pandemic management could result in higher mobility and confidence which will spur revenge spending among consumers and more infrastructure spending by the government.
Thus, he said, investors should take and drops in share prices as an opportunity to invest for the long term provided that they appreciate the fundamentals and know the sectors to invest in.
Ravelas said the laggard property sector is seen to benefit the most from these factors. It will also benefit from the influx of foreign brands entering the market with the amendments of the Retail Trade Liberalization Act as well as strong recovery in demand for office and retail space.
He said the economy is also seen to get a boost from the Corporate Recovery and Tax incentives for Enterprise (CREATE) which is the largest economic stimulus for businesses in country, the ease of doing business law, Foreign Investment Act(FIA), Public Service Act(PSA), and Retail Trade Liberalization Act (RTLA) amendments.
Following the global reopening theme, Ravelas said the next best industries for investing will be those in the tourism, gaming, manufacturing, and mining businesses.
He advises investors to be flexible and and adapt to the changing political and economic landscape noting that, “The wind never blows to where the sailors want to. The sailor (investor) adjusts himself to the wind accordingly.”