Philippine central bank governor Benjamin Diokno spoke for many last week when asked about the biggest economic risk globally: Donald Trump, he replied.
But as much blame as Trump gets, and deserves, for his trade war and attacks on the Federal Reserve, policymakers in Southeast Asia confront something just as serious at home: how efforts to modernize economies often take second place to rapid growth.
The Philippines is Exhibit A of how stellar macroeconomic trends are undermined by cracks in the microeconomics below. President Rodrigo Duterte's economy grew 5.5% in the second quarter -- not dreadful by the standards of the U.S., Germany or Japan, but well short of the 7% growth Duterte inherited from predecessor Benigno Aquino.
Growth is now the slowest in four years, even though Duterte took office in June 2016 pledging a boom not unlike what Donald Trump promised in the U.S. With growth well below what investors expected from Dutertenomics -- which consists of accelerating infrastructure upgrades, improving the ease of doing business and investing in human capital -- it is worth exploring what is going wrong. Here are three specific areas of concern.
First is that reform must avoid short-term bursts of ultimately unsustainable growth. Aquino's two predecessors adhered to the cult of GDP: get gross domestic product above 5% and everything else will take care of itself. That meant lots of government stimulus and exporting more and more Filipino people overseas so they could send remittances back home to fuel consumption.
Aquino came to office looking to alter the short-termism that had long plagued Manila politics. He increased accountability among government institutions, reduced opportunities for graft and put more public services online.
He strengthened the balance sheet and increased tax receipts, winning Manila its first-ever investment-grade bond ratings. This provided more cash to invest in infrastructure and education.
Duterte was elected to turbocharge reforms by breaking bottlenecks in industries from property to agriculture and improving law and order. In nearly three decades running the southern Davao City, Duterte often produced lower crime, faster growth and less corruption than the national average, albeit with a bloody war on drugs.
But his economic policy has been a giant "build, build, build" program that is proving to be an old-fashioned spending binge to increase growth rather than a means of raising Manila's competitiveness.
On Duterte's watch, Manila has dropped considerably in the World Bank's ease of doing business tables. In 2016, the Philippines ranked 103rd. Today it is 124th.
Moreover, the Philippines is still too reliant on remittances. On the campaign trail and since, Duterte has talked about bringing home the diaspora -- more than 10% of Filipinos work abroad, often away from their children, because of a dearth of well-paying jobs at home. Yet in 2017, he created a bank for Filipinos overseas, showing how important remittances are.
So far, Duterte has relied more on easy credit than structural upgrades to improve the investment environment and encourage innovation to produce a tech unicorn or two.
The Central Bank of the Philippines has dutifully pumped pesos into the economy to help Duterte out. Since March, when Duterte tapped Diokno as governor, the central bank has cut short-term rates twice. Diokno -- under pressure from Duterte -- pledges another cut by year end.
The second concern is corruption. The Philippines has stayed stable in Transparency International's annual corruption perceptions index since Duterte took over, but under Aquino it rose 40 places from 134th, when it was behind Nigeria.
That progress toward a cleaner, more efficient system is getting lost in the $180 billion infrastructure boom. Aquino was criticized for moving too slowly to greenlight huge road, port, airport and power-grid projects. CEOs groused that he put too much emphasis on open bidding, audits and environmental studies.
Duterte has moved most faster, though in ways increasing opacity. Whereas Aquino favored a public-private-partnership model, Duterte has the government leading projects. That risks a return to the bad old days of graft and runaway debt.
The idea is not to let the private sector run amok. But with multilateral organizations like the Asian Development Bank in the mix, PPP deals tend to involve greater oversight and fiscal responsibility.
Finally, there is the problem that the Philippines' neighbors are becoming more competitive just as Duterte relies more on monetary easing. India, Indonesia, Malaysia, Thailand and Vietnam are ramping up infrastructure building, too. All are improving their digital economies, which allows upstarts to leapfrog over peers in short order.
Rather than championing easy money and fast infrastructure deals, Duterte should simplify foreign investment and tax rules. He should increase foreign access to sectors from power to agriculture to inject greater competition. He should invest more in education and training, and he should focus on policies to create jobs from the ground up to bring more of the Filipino diaspora home.
While Trump's retrograde policies bear much of the blame for slowing growth across Asia, Duterte is coming dangerously close to making the Philippines a cautionary tale of complacency -- again.
William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."