Next president must oversee rebound – economic strategist – Manila Bulletin

As national and global economies are on a more stable path to recovery, the next Philippine president will have to deal with ballooning debt and more expensive loans while dealing with rising inflation and possible new virus variants, according to the country’s economic strategist.

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Jonathan Ravelas, chief market strategist at the country’s biggest lender, BDO Unibank, said who wins the election in the first 100 days for the new administration will be critical, while “choosing the right people for the job ( economic manager) is more important than developing a strategy.”

“What we need is a captain to get us out of the storm. The next leader must be able to weather the economic and social crises we face, to put us back on the path to growth. The performance of our markets will greatly depend on this,” he explained.

Ravelas cited a Bloomberg poll showing Vice President Leni Robredo getting the highest score from investors and analysts for emerging “as their top pick to oversee an economic rebound” while finding that Ferdinand Marcos Jr’s platform .lack of clarity.

“Market participants are still watching the candidates’ plan on taxes, incentives, infrastructure spending and foreign investment,” he added.

Additionally, Ravelas said the next administration’s foreign policy will also be closely watched, noting that incumbent President Duterte has favored closer ties with China but reinstated a key military agreement with the United States.

Jonathan Ravelas, Chief Market Strategist at BDO Unibank

He said the next president should start by focusing on the social, health and economic fronts by strengthening public institutions and equality, accelerating the deployment of vaccines to improve mobility, control inflation and “strengthen the mobilization of domestic revenues to rebuild fiscal reserves and address debt sustainability issues”.

Performance of the PSEi in the 12 months following each presidential election. (The PES was created on December 23, 1992)

Regarding the stock market, Ravelas said that historically the PSEi has gone up after the elections because the elections have always been peaceful and the transition to the next administration has always been smooth.

The assumption of a new president led the PSEi to increase over the following 12 months since 1998. After an initial drop, even the first year of the Estrada administration saw the PSEi increase by 14.82%.

The biggest 12-month post-election gain was during the late President Benigno Aquino’s tenure at 36.95%, followed by President Gloria Arroyo at 24.24%. The lowest growth was recorded during President Duterte’s tenure at 13.32%.

For this year, Ravelas said the PSEi could reach the 7,800 level, boosted by factors such as the continued reopening of the economy, the low number of Covid infection cases and government spending.

He added that peaceful elections combined with better management of the pandemic could lead to increased mobility and trust, which will spur consumer revenge spending and more government infrastructure spending.

So, he said, investors should take falling stock prices as an opportunity to invest for the long term provided they appreciate the fundamentals and know the sectors in which to invest.

Ravelas said the lagging real estate sector is seen as the biggest beneficiary of these factors. It will also benefit from the influx of foreign brands entering the market with changes to the law on the liberalization of retail trade as well as a strong recovery in demand for office and retail space.

He said the economy should also benefit from the business stimulus and business tax incentives (CREATE), which is the biggest economic stimulus for businesses in the country, the ease of doing business law, the law Investment Act (FIA), Civil Service Amendments to the Retail Liberalization Act (PSA) and the Retail Liberalization Act (RTLA).

Following the theme of global reopening, Ravelas said the next best industries to invest in will be tourism, gaming, manufacturing and mining.

He advises investors to be flexible and adapt to the changing political and economic landscape, noting that “the wind never blows where sailors want it to. The sailor (investor) adapts to the wind accordingly.

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