New president of the Philippines faces tricky economic balancing act

President-elect Ferdinand Marcos Jr faces a tricky balancing act between supporting the economic recovery and containing the Philippines’ burgeoning fiscal deficit. Based on the latest budget, we expect it to average 8% of GDP this year, only a modest narrowing from 8.5% in 2021 amid some improvement in revenues on the back of stronger domestic demand.

What you will learn:

• Marcos Jr’s fiscal agenda in unclear. He may lean toward further fiscal expansion, which could lead to credit ratings downgrades and increased risk aversion for Philippine’s assets.
• Amid higher commodity prices, we expect the current account deficit to jump to 5.2% of GDP from 1.7% last year, and the Philippines’ external financing buffer to narrow sharply.
• The peso has already come under pressure due to the hawkish US Fed, rising global uncertainty due to Russia’s war, and Chinese lockdowns.