Finance Minister of the Year for Asia 2013
Cesar Purisima, Philippines
The Philippines has powered ahead despite economic weakness in other parts of the world; it has enjoyed six straight quarters of growth, with the last four quarters exceeding 7%.
Finance secretary Cesar Purisima deserves kudos for reducing the budget deficit and steering the economy to investment-grade status, Mark Williams, an analyst with Capital Economics, says. He was a major contributor to the decision by rating agencies to upgrade his country. Fitch raised the Philippines rating in March, Standard and Poors in May and Moodys in October.
In the second quarter, the economy expanded by 7.5% year-on-year, beating analysts expectations for the sixth consecutive quarter. Analysts at RBS note that the strong growth performance was due to increased government spending. They point out that government consumption increased by 17% year-on-year, compared with the first quarters 13.2% expansion. Public construction expanded by 31.1%, after a 45.6% jump in the first quarter. Because of the fast pace of public spending, the budget deficit widened by 41.9% between January and July, but Purisima said it was on target.
However, the breakneck speed of the Philippines economy has got some experts worried about overheating. Analysts at RBS say that government spending is likely to slow in the second half of the year, and growth is likely to be lower as a result; they expect the economy to expand by 6.6% in the third quarter compared with the same period last year. While we expect slower sequential growth going forward, overheating risks have not receded in our opinion, they note in a recent analysis of the Philippines. The analysts warn that the country has recorded above trend growth since last year, primarily driven by a construction boom and loose liquidity. Construction activity is largely debt-financed and, indeed, real-estate related lending has been rising at around 25% year-on-year, they say, but they add that the risks of overheating are predominantly to asset prices. Phil Thornton, Antonia Oprita
When President Aquino took office in the Philippines, he instructed the cabinet to right the ship and to implement the law strictly, according to what he calls the "straight path", which means no cheating or shortcuts, Philippines finance secretary Cesar Purisima recalls. "In our Department of Finance, this has meant plugging revenue leakages, bringing our borrowing and cash management under control, and instilling discipline and professionalism in our state-owned businesses," Purisima, speaking before the Moodys upgrade, tells Emerging Markets. "This has resulted in two investment-grade ratings so far from major raters as well as marked progress on the WEF Global competitiveness rankings."
All this has led to increased investor confidence and lower borrowing costs for Philippines businesses. "In time, these businesses will grow to become valuable sources of revenue for even more social projects, as well as drivers of innovation and leadership in the country. Overall, this has been our greatest accomplishment we have redefined the Philippine story to the world," says Purisima.
But he concedes there were challenges, with one of the most prominent being the policy debate on reforming taxes on so-called "sin products", like alcohol and tobacco. "This is a reform that Philippine finance secretaries had been trying to pass for 15 years, but because of the strong mandate and public confidence achieved by President Aquino, we decided to make a strong push for it last year," says Purisima. The reform was passed successfully. "In the coming years, I hope that we are able to push even more landmark reforms through under President Aquinos good governance agenda. In our finance department, I want to draw attention to upcoming reforms in our customs bureau which are aimed at solving even more longstanding problems."
The challenges are not over, despite the Philippines economy surging ahead. The biggest challenge for Purisima is ensuring that the gains are sustained. "How do we ensure that the progress we have made will be enjoyed by Filipinos not just now, but for the terms of all future presidents and finance secretaries?"
One key issue is pushing for the reforms to be "solidified in legislation", as the government enjoys a strong political mandate. "Thus, we have to make sure that key reforms we want to push are enacted into law," Purisima says.
"We plan to make our playing field even more level by reducing the restrictions our laws place on foreign investment. We also expect to finalize a revenue-sharing scheme for our mining industry this year, to harness our potential as one of the worlds most mineralized countries," he adds.
The second area of focus should be investment in infrastructure, as the Philippines is a "heavily consumption-driven economy", with the median age of the population around 23. The median age is projected to rise to 35 by 2050. "A population that stays prime age for a long time is a powerful ingredient to continued strong growth but to fully realize these gains, we have to make sure that our cities and business centres have the physical backbones to sustain our peoples productivity," Purisima says. A.O.