(Bloomberg) -- Philippine President Ferdinand Marcos Jr.’s plans to boost the economy and uphold claims in South China Sea are expected to take center stage as he delivers his third State of the Nation Address in Congress on Monday.
With the midterm election less than a year away, Marcos’ speech will also be an opportunity to highlight the steps his administration has taken in taming inflation and bolstering ties with allies like the US. The president would possibly draw political lines after his alliance with Vice President Sara Duterte unraveled in previous weeks.
The speech comes as Marcos’ popularity rating continued to slide against the backdrop of a widening rift with the family of his predecessor Rodrigo Duterte. Elevated inflation along with persistent poverty and joblessness remain key concerns. Governance issues are also at the fore with controversies on online casinos, Marcos’ push to amend the Constitution and the slow progress in the sovereign wealth fund.
Here are the things to watch in the speech scheduled at 4 p.m. in Manila:
Cost of Living
While the economy has demonstrated resilience and inflation has cooled to within the central bank’s 2%-4% target this year, elevated prices have dominated Filipinos’ worries at last month’s Pulse Asia survey.
“Inflation is a major problem, and it looks like all forces are going to work to bring down rice prices and the high cost of living,” said Cristina Ulang, head of research at First Metro Investment Corp.
Economic growth in the first quarter showed signs of strain amid borrowing costs at a 17-year high. The government slashed rice import tariffs by more than half, a move that may enable the central bank to cut the policy rate as early as next month.
Marcos, 66, remains under pressure to continue finding ways to durably tamp down prices and bolster growth to within the government’s 6%-7% target.
Foreign Policy
Over the past year, Marcos further strengthened defense ties with US, as well as with allies including Japan and Australia, while similar arrangements with France and Canada are under discussions.
Marcos has shifted the Philippines back toward the US since he took office, departing from his predecessor and defying China’s expansive sea claims. Marcos took a swipe at China during a defense summit in Singapore in May, saying that “Filipinos do not yield.”
Yet a clash last month that saw a Philippine sailor lose his thumb underscored the need to defuse tensions. Both sides signal openness to dial down the conflict.
A possible return of Donald Trump to the White House is also raising questions about the steadfastness of the US support. Ambassador to the US Jose Manuel Romualdez said in an interview that he’s confident that should Trump win, he’ll maintain the strong US alliance with the Philippines.
Tax Bills
Whether Marcos will advocate for tax bills in his speech is worth watching.
His government is trying to balance a limited fiscal space with a push for more spending on social programs and infrastructure, especially with the May 2025 midterm polls in the horizon.
His administration’s priority measures include imposing value-added tax on digital services, rationalization of the mining fiscal regime, and a bill that seeks to enhance tax perks to companies and clarifies rules on VAT incentives.
Higher revenues will enable Marcos to fund a proposed 6.35 trillion pesos ($108.9 billion) budget for 2025 while keeping the deficit under control.
Political Plans
Marcos could use Monday’s address to rally support from his Congress allies led by his cousin, House Speaker Martin Romualdez. He could also take the opportunity to amplify his backing for the plan to rewrite economic provisions in the Constitution.
Former President Duterte said the move was a way for Marcos to stay in power. Whether Marcos will address his conflict with the Dutertes in his speech remains to be seen. Sara Duterte had said she won’t be attending Monday’s address.
--With assistance from Ditas Lopez.
©2024 Bloomberg L.P.
