The latest rate cut by the Philippine central bank is another reminder that Asia is having a rough 2019.
Trade wars, rising oil prices and gyrating markets have sent the region's policymakers scurrying to protect economic growth. In reducing its benchmark lending rate for the first time since an operational adjustment to the benchmark in 2016, Bangko Sentral ng Pilipinas joined monetary authorities in Malaysia, New Zealand and elsewhere in hitting the economic accelerator.
BSP Governor Benjamin Diokno's May 9 move also reminded investors of the mounting risks to one of Asia's fastest-growing economies.
Few are quibbling. Earlier the same day, Manila reported its slowest growth in four years, sending stocks spiraling lower. The 25 basis-point cut to 4.5% seems reasonable in the light of the recent drop in inflation pressures. The 5.6% annualized increase in gross domestic product between January and March marked the first sub-6% performance in 16 quarters.
Yet the deceleration in growth has less to do with the price of pesos than with trust.
In 2016, voters rallied around Rodrigo Duterte's pledges to get big things done. He won the presidency based on his 23-year track record in Davao City. Mayor Duterte often produced growth rates above the national average. The southern city's infrastructure won accolades, as did its comparatively low crime rates and reputation for less bureaucracy than businesses confront in Manila.
Duterte was elected to turbocharge predecessor Benigno Aquino's six-year effort to raise competitiveness, curb corruption and morph the Philippines into a premier investment destination. Yet he seems to have left his reformist toolbox back in Davao. Over the past three years, he has tended more to symptoms of Manila's challenges than the underlying problems.
The centerpiece of his growth model is an ambitious "Build Build Build" infrastructure boom. A key element was fast-tracking upgrades to roads, airports and power grids. Aquino's worries about graft and environmental damage were, Duterte argued, bad for business.
All that building fanned inflation. The sudden surge in construction material imports left Southeast Asia's fourth-biggest economy with the region's highest consumer price increases -- approaching 7% a year.
That had BSP scrambling for control. Diokno's predecessor, the late Nestor Espenilla, oversaw 175 basis points of tightening in 2018, driving borrowing costs to the highest in a decade. Since then, inflation eased back into BSP's target 2% to 4% range, and the central bank sees inflation averaging about 3% this year.
For now, at least. Manila's inflation troubles, remember, have more to do with economic inefficiency than the volume of pesos in circulation. Supply bottlenecks, customs delays, rent-seeking middlemen and poor storage all fan prices, and are beyond BSP's control. This means they could quickly flare up anew.
Diokno has so far confounded critics fearing he, as the president's ex-budget chief, would be Duterte's ATM cash machine. BSP watchers find significance in Diokno leaving commercial banks' reserve requirements at 18%.
There is a risk, though, that Duterte figures his job on the economy is done, further slowing reforms. The central bank is back supporting growth, reducing the pressure for growth-boosting reforms.
Meanwhile, Duterte also just won an oddly-timed endorsement from Standard & Poor's.
On April 30, S&P raised Manila's credit rating one notch to BBB+, two levels above minimum investment grade. It cited the nation's "strong growth trajectory" and sustainable public finances.
What is missing, though, is an acknowledgment that Duterte is still reaping the benefits of Aquino's heavy lifting. When he passed the keys to Duterte, Manila's ranking in Transparency International's annual corruption perceptions index soared to 95th. The economy Aquino inherited in 2010 trailed Nigeria at 134th. Since 2016, Manila has fallen back to 99th. Not an epic reverse, but a warning sign that Duterte is failing to replicate his Davao success.
Rather than intensify moves to clean up Manila, Duterte launched a ghastly war on drugs. Along with the terrible headlines it generated, Duterte's lack of focus on economic upgrades turned off investors. In 2018, foreign direct investment fell for the first time in three years -- by 4.5% to $9.8 billion.
Voters seem far happier. Some 79% of Filipinos like the job Duterte is doing, according to Social Weather Station. That augurs well for his party at the time of the May 13 midterm elections. Yet still healthy growth rates may be distracting households from the looking dangers to come.
Amid the chaos of the last few years, little progress was made on reducing foreign-ownership restrictions, exorbitant power costs and disjointed infrastructure policies.
The previous government favored a public-private model putting quality and accountability over speed. Duterte favors the old ways of the government doing the building, and then licensing out contracts. Or, loans from China. That seems a recipe for weaker government finance and reanimating the corruption Duterte promised to smash.
There is still time for Duterte to regain reformist momentum. After the election, the government can refocus on modernizing the economy. Duterte must spend the next three years earning S&P's upgrade and ensuring more to come. That means redoubling efforts to reduce graft, settle foreign investment rules and spend more on education and increased productivity.
Last month, Manila heard from another credit rater: Fitch. It raised concerns about political squabbling interfering with raising economic competitiveness. Manila entered 2019 operating on an interim budget. That delayed passage of the overall $72 billion budget, which includes spending on infrastructure and pay increases for government workers.
A more focused president might have avoided an impasse with Congress which contributed to the slowdown.
Duterte also can work to match Indonesia's success in catalyzing a startup boom. Policy tweaks and tax incentives that create jobs are needed to stop an exodus of talent.
The risk is that Duterte continues to prioritize faster GDP growth over supply-side changes. That temptation might only increase as fallout from the U.S.-China trade clash roils Asian supply chains. It also could keep voters content for a while longer, as borrowing costs drop. Yet sooner or later heavy lifting will be needed -- and it must come from Duterte's government, not the central bank.
Markets probably have not heard the last from the BSP. Economist Prakash Sakpal of ING Bank predicts one more 25 basis-point cut this year. Jessie Lu of Continuum Economics expects another two rate cuts and a 200 basis-point drop in reserve requirements.
Yet more than BSP cash, the Philippines needs productive things to do with it. Duterte spent 23 years in the south proving he knows how to take care of business. It is time to bring that tool kit to Manila.
William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades." He was given the 2018 prize for excellence in opinion writing by the Society of Publishers in Asia for his Nikkei Asian Review work.