FILE PHOTO - Incoming Philippine Central bank Governor Nestor Espenilla speaks during a news conference at the Bangko Sentral ng Pilipinas in Manila, Philippines May 9, 2017. REUTERS/Karen Lema

If any economy in Asia should be worried about Janet Yellen’s US rate-hike cycle it’s the Philippines.

While Benigno Aquino’s reform drive recast the “Sick Man of Asia” as an investment darling between 2010 and 2016, the former president did so with a sizable assist from the US Federal Reserve.

It’s post-Lehman-crisis quantitative easing flooded the world with money, offering breathing space to nations like the Philippines to repair national balance sheets. Fed Chair Yellen’s tightening moves mean that tailwind is no more.

Whither the Philippines, which is now run by Rodrigo Duterte, a leader who knows more about shooting foes than economic policy?

Much of the answer will fall on Nestor Espenilla’s lap. On July 2, he takes the reins at Philippine central bank, by far the nation’s most-respected institution.

Throughout the last 20 years, Bangko Sentral ng Pilipinas has been the glue holding a geopolitically-vital economy together.

From Rafael Buenaventura (1999 to 2005) to Amando Tetangco today, the Philippines has been blessed with skilled BSP governors.

What presidents have often lack in credibility — Joseph Estrada (1998-2001) and Gloria Arroyo (2001-2010) ended up in jail or house arrest -– the central bank exudes in surplus.

Benigno Aquino was a glaring exception, reining in budget deficits, increasing transparency, attacking graft and winning Manila’s first-ever investment-grade ratings.

His successor, Duterte, rode a populist wave not unlike the one that delivered Donald Trump to office. Despite Aquino’s successes, voters favored a blusterous strongman over a policy technocrat.

The last 354 days under Duterte have been more about guns than butter.

The last 354 days under Duterte have been more about guns than butter.

His bloody war on drug pushers and users has drawn uncomfortable parallels to the Ferdinand Marcos-era and put economic progress on the backburner.

During this time, Tetangco and his team at BSP helped maintain some semblance of continuity –- a whiff of leadership in a hail of machine-gun fire.

And in less than two weeks from now, Tetangco leaves the building. Fortunately, Espenilla is a good and comforting choice.

Really, Duterte could’ve chosen an unqualified crony, Trump-style, or even hired someone from the disgraced Marcos family, which he, weirdly, reveres.

Espenilla, 58, is a Tetangco deputy who joined BSP in 1981. He studied in Tokyo and did a stint at the International Monetary Fund before assuming the BSP unit overseeing banks.

There, he’s encouraged mergers and acquisitions and greater access for foreign lenders. Equally-important, Espenilla is widely respected (fans even set up an #Espenilla hashtag).

The question, though, is whether Espenilla will be able to push back should Duterte try to neuter the central bank like other key institutions.

The question, though, is whether Espenilla will be able to push back should Duterte try to neuter the central bank like other key institutions.

Fans say yes, and I hope they’re right. I’ve met Espenilla a few times and also moderated some panel discussions on which he’s participated.

He’s a bright guy and seems fiercely protective of the central bank’s credibility and its role as a failsafe when elected officials do their worst.

But will Duterte respect that autonomy? When growth slows, and hints are it’s doing just that, might Duterte lean on Espenilla to cut rates?

Would he try to strong-arm BSP toward some kind QE experiment to provide cheap financing as Yellen mops things up the West?

Might Duterte try to coax the central bank to prop up peso-asset markets if investors flee? Or finance public projects?

At the moment, Philippine markets are being buoyed by talk of tax reform and an infrastructure boom that’s far more talk than action.

It’s troubling, too, that Duterte favors government-led projects to upgrade roads, ports, airports and power grids over the private sector. That could blow up the national debt and return Manila to the bad old days of rampant corruption, inefficiency and dodgy governance.

It’s good news, against this backdrop, that Duterte chose a pro like Espenilla. But whether the president turns on the central bank will say much about the trajectory of one of Asia’s most promising economies.

That makes Espenilla THE man to watch.

(William Pesek is a Tokyo-based journalist, former columnist for Barron’s and Bloomberg and author of “Japanization: What the World Can Learn from Japan’s Lost Decades.” Twitter: @williampesek)

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