DAVAO CITY—The Duterte administration has sent an early feeler to the next administration to signify it is ready to assist in the transition period in four important economic concerns.
Finance Secretary Carlos Dominguez III said the transition period next year would be important for the next administration to be apprised and versed “in addressing four primary concerns that will affect the Philippines’ economic stability beyond 2022.”
“These four issues involve: prudent debt management in relation to growing the economy above 6 percent per year; inflation caused by global shortages; pandemic-induced inequalities; and climate change,” the finance chief said.
Why he said that the economic team was ready to assist in the transition was because of the promising comeback the economy showed recently “after going through a difficult episode amid the pandemic.”
“The Philippines is poised for a strong recovery towards a more inclusive economy owing to the strength of its institutions and the firm foundations laid by the Duterte administration over the last five years,” he said.
Dominguez said the worst of the pandemic has passed and the country is well on its way to a strong rebound as it scales up its Covid-19 vaccination program to cover 100 percent of the adult population and persons aged 12 to 17 years old.
“We have strengthened our public health system and we will continue to do so in the coming years. Our people have woven health protocols into their daily lives,” Dominguez said.
“As we relax restrictions on movement, our domestic economy appears to be responding with strength. After so many challenging months, the numbers are now all in our favor,” he added.
He cited the Philippines’s increasing foreign direct investments (FDI), growing remittance inflows from overseas Filipino workers (OFWs), more-than-enough international reserves despite the sharp spike in oil prices, stable exchange rate and rising revenue collections as indicators of an economy on the way to a strong recovery.
Dominguez also cited the country’s solid fiscal position under the Duterte administration—as reflected in its sustainable debt-to-GDP ratio, high credit ratings, successful bond issuances amid the pandemic, to name a few—as the other factor that will ensure the country’s strong economic rebound.
He said that on top of ensuring fiscal prudence, the Duterte administration also introduced numerous policy reforms to build a business-friendly environment, among them, the reduction of red tape; the digital transformation of public agencies; implementation of a National ID system; infrastructure modernization; and a rationalized corporate income tax (CIT) and fiscal incentives policy through the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law.
The remaining period of President Duterte’s term will be focused on rapidly modernizing governance; accelerating the rollout of the “Build, Build, Build” infrastructure program; and continuing with the market-friendly reforms attractive to investments, Dominguez said.
He emphasized that accountability and transparency are paramount to ensure the prudent use of these funds that come from taxpayers.
“The Duterte administration will ensure that the next presidency will be ably assisted during the transition period in addressing four key issues that will impact the Philippines’s economic stability. These include ways on how to prudently manage the debt we have accumulated and grow our GDP at a rate higher than 6 percent per annum as we have done. We need to deal with the issue of inflation brought about by shortages around the world,” Dominguez said during a virtual economic forum.
“We need to manage the inequalities exacerbated by the Covid-19 pandemic—both within the country and among countries. And finally, we need to address climate change without stretching the fiscal space of the country,” he added.
Debt issue
Dominguez pointed out that debt and lower revenue collections were the “unexpected costs of the pandemic” triggered by pandemic curbs. He said the country’s debt-to-GDP ratio climbed up to about 63.1 percent in the third quarter of this year.
Dominguez said the strong point with the Philippines was that managing the debt problem “remains eminently sustainable, especially as more than two-thirds of our borrowings are being sourced from our very liquid domestic market.”
“The stability of the peso indicates this. We expect to begin working down our debt by next year,” he said.
Dominguez said he also expects the government’s programmed budget deficit to start declining, with next year’s target reaching 7.7 percent of GDP.
“This is well-supported by the rebound of revenue collections, which puts less pressure on our borrowing requirement and debt sustainability threshold,” he said.
The government’s measures to transition to a digital economy, such as the use of electronic channels by the main revenue-generating agencies to enable them to overshoot their collection targets, and the migration of transactions online to develop broad-based and inclusive capital markets, such as those initiated by the Securities and Exchange Commission (SEC) and the Bureau of the Treasury (BTr), are among the reforms that have been put in place and expanded by the Duterte administration, Dominguez said.
He also underscored the timely passage of the CREATE law that offered businesses the biggest stimulus package ever to help them recover from the pandemic, and modernized the fiscal incentives system to encourage more high-value investments and innovation.
He said CREATE complements the other reform efforts initiated by the Duterte administration to make the Philippines more business friendly.
These include the Anti-Red-Tape Act (ARTA), Ease of Doing Business Act, infrastructure modernization program, and establishment of a National ID system, among other measures.
The Philippines will take full advantage of its demographic sweet spot, where its young and talented population means a work force prepared to swiftly adjust to the transformations taking place in the economy, Dominguez said.
He urged entrepreneurs to maximize the impact of these business-friendly measures by shifting to the circular economy and other sustainable practices.