William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."
As the coronavirus fallout hits global demand, the Philippines is turning to President Rodrigo Duterte's favorite growth stabilizer: infrastructure.
In recent days, acting Socioeconomic Planning Secretary Karl Chua made clear that the rest of 2020 is all about BBB, referring to Duterte's signature $180 billion "Build, Build, Build" program. "We will be entering a new normal, and we will have to determine which of the BBB projects have the maximum impact," Chua told reporters last week.
Yet it is worth asking whether Manila should be more concerned about a different BBB: the nation's credit rating.
Granted, major rating companies are not as yet threatening imminent downgrades. There are, however, hints that sovereign credit raters overseas are getting anxious about Duterte's ability to navigate the COVID-19 storm hitting Southeast Asia.
Moody's Investors Service earlier this month downgraded to negative its outlook for the Philippines' banking sector. Fitch Solutions, the research arm of Fitch Ratings, warned of "external financing challenges" as COVID-19 fallout widens Manila's current-account deficit.
Such concerns are really a microcosm of where Dutertenomics has gone wrong these past four years.
In June 2016, Duterte took over the presidency from Benigno Aquino, who had spent the previous six years repairing the national balance sheet. Aquino's success going after tax cheats, bringing accountability to government institutions and increasing transparency won Manila foreign investment and its first-ever investment-grade ratings.
Duterte was elected to turbocharge the reform process.
His 22 years running Davao City in the south accorded him folk-hero status. Mostly, though, he rested on Aquino's laurels. Instead of building up the economy, he launched a bloody war against the drug trade. Thanks to the average 6% growth in gross domestic product Aquino bequeathed him, Duterte figured the economy was already sorted.
But now inertia is no longer an option as consumption plunges, factory output slides and many of the pillars of growth Manila took for granted go wobbly, chief among them remittances. The cash that about 2 million Filipinos send home from Hong Kong, Dubai and cruise ships around the globe accounts for at least 10% of GDP. That cash is now in short supply as those jobs disappear. The same goes for tourism, which accounts for 25% of GDP.
Duterte's pivot back to infrastructure has a certain logic: it might be the fastest way to jolt GDP. Just a few months ago, the International Monetary Fund tipped the nation of 105 million to grow a China-level 6.3%. Now it will be lucky to eke out the 0.6% the IMF is penciling in as coronavirus fallout deepens.
The problem is that Duterte's building boom is racing ahead of progress on eradicating corruption, ease-of-doing-business concerns and limiting political chaos. One particular gripe among foreign investors is a messy and protracted tax-reform process that was supposed to increase the attraction of sectors like infrastructure.
Such upgrades are challenging in the best of times. In the current pandemic, though, they appear to be falling off Duterte's radar. The Philippines has been vying with Indonesia for the dubious honor of Southeast Asia's worst COVID-19 outbreak.
Flattening the coronavirus curve is the most immediate task. Duterte has imposed one of the region's most aggressive COVID-19 responses, a lockdown in the northern island of Luzon affecting roughly 57 million people. He also has, sadly, let his rhetoric get away from him, stating those who ignore stay-at-home measures should be shot.
What Duterte must aim for is a balance between public health and getting Aquino-era reforms back on track. There is a view that the Philippines was on a roll before the COVID-19 outbreak hit emerging Asia, but in fact the momentum of the Aquino years had steadily been wearing off. Duterte's economy entered this battle on a weak footing.
Duterte tossed lots of sugar at the problem, including staffing the central bank with an easy-money leadership. Though economic hardware -- better roads, ports and power grids -- is plenty important, Duterte has not upgraded the software much. Steps to empower startups, revamp education and training, modernize the tax system and champion good governance have been few and far between.
Philippine manufacturing, meantime, contracted precipitously in March. The purchasing managers index, which reflects market sentiment, dropped to 39.7 from 52.3 in February. That put the economy well below the contraction-or-expansion line of 50. It also means the Philippines slowed far more abruptly than Japan, South Korea, Vietnam and a number of other peers.
Nor is the World Bank's most recent assessment comforting: it warned the Philippines could be in for a deeper contraction. As the coronavirus fallout intensifies, the World Bank says, the economy could shrink 0.5% this year.
No leader in Southeast Asia can be blamed for a pandemic upending global markets. But Duterte's Philippines has quickly found itself behind another curve: protecting a BBB credit rating Manila spent the last 10 years earning. The Philippines cannot just "Build, Build, Build' its way to health.