The economic team of the Marcos administration targets to achieve three overarching objectives by 2028 or by the end of this administration’s term: reduce the deficit-to-gross domestic product (GDP) ratio to three percent, achieve upper-middle-income status and bring down poverty incidence to single-digits.
This was disclosed by Benjamin Diokno, secretary of the Department of Finance (DOF) at the agency’s turnover ceremony in Manila last June 29.
Diokno said prior to the pandemic, the Philippines was poised to achieve the government’s goal of reducing poverty incidence to 14 percent or lower by 2022. However, between the first semester of 2018 and the first semester of 2021, poverty incidence rose to 23.7 percent.
“This was expected given the necessary quarantine and health measures imposed by the government during the pandemic that slowed down economic activity,” Diokno said.
“This (goal of poverty reduction to single-digits) will be possible by pursuing a strong broad-based growth for the next six years,” he added.
On the public debt situation, Diokno said like the rest of the world, the government incurred bigger deficits and borrowed heavily as a result of the pandemic.
“…the increase in debt was put to good use. Had we not invested in vaccines and other COVID-response measures, we would still be languishing from COVID-19 and the economy would still be in a deep slump,” Diokno said.
“With a general government gross debt of 53.5 percent as of 2021, the Philippines falls at around the median among Asean peers. We intend to stay in the middle of the pack among Asean neighbors in terms of the debt ratios. We will balance the requirement of supporting economic recovery, while keeping our debt-to-GDP ratio within the sustainable threshold,” he added.
Diokno also said the government will continue the country’s pursuit of A-level rating, and this can be done by crafting a medium-term fiscal consolidation framework.
“We are working on said framework that will map out our fiscal profile — everything from revenue assumptions to financing programs,” Diokno said.
“…the first half of the fiscal consolidation framework will be more detailed, covering the first few years of the Marcos administration from 2022-2025 and that is because it coincides with the three-year journey of Congress,” he added.
Diokno said the fiscal consolidation framework will contain measures that are fair and efficient.
“On fairness, we propose a broad-based tax system where all Filipinos contribute their fair share. On efficiency, our proposal covers areas where tax laws and administrative policies need to catch up, such as taxes on digital services,” he said.
Diokno said the identified goals are all anchored on sustaining the growth momentum.
“Grow the economy and almost everything else will follow. It will help reduce the deficit, so we don’t have to borrow as much. A growing economy also means more taxes and revenues. We all know that revenues are responsive to economic growth. It will also help us with the employment problem since it can generate high-quality jobs, in effect, contributing to declining poverty incidence,” he said.
According to Diokno, the new administration aims to promote inclusive economic growth through three key strategies.
“First, we will adopt the government’s risk management and vaccination strategy in dealing with the pandemic. Second, we will continue to invest heavily in infrastructure and in our people. We will … fund investments in education and health care to keep our workers healthy and our learners competitive over the long run. Third, we will sustain the strong economic fundamentals mentioned earlier, maintain fiscal discipline, and build on the current reform momentum,” he added.
Meanwhile, on the sidelines of the same event, Diokno said a weak peso should not be a cause of concern.
“…you should not be concerned with the peso, (because) the right way to look at the peso is, is the peso competitive. How do you measure that? The technical term is real effective exchange rate. How does it compare with other competitors? We’re in the middle, so our currency is competitive,” he said.
He pointed out all the other currencies are depreciating, with the highest depreciation seen in the Japanese yen and Indian rupee.
Diokno said with a strong peso, among those who benefit are the rich and those who can afford to travel overseas.
“Strong means what? You need less peso to buy your dollars. Who are the winners then? It can be those who like to travel abroad, the rich, the Ferragamo and Hermes crowd, because foreign goods are their preference,” Diokno said.
“Now that the peso is weak, who will benefit there? The exporters and the overseas Filipino workers. They have more pesos in relation to the dollar,” he added.
