The light at the end of the PH economy tunnel
Planting the seeds for revenue. (Photo: iStock)
Things are finally looking up for the future of the Philippine economy as the next administration is gearing up to make the country’s first-of-its-kind six-year fiscal plan. The number one goal? To bring back pre pandemic budget deficit levels by 2028.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, who will be the next Finance chief for the Marcos Jr. administration revealed in an interview that the meeting held last week with the incoming economic team discussed priorities moving forward with the pandemic recovery.
Diokno’s proposal to create a formal fiscal plan that will take into consideration government expenditures, borrowing and revenue programs, and policies to manage budget deficits was approved.
“The President will present [the fiscal plan] immediately in his first SONA. It’s a broad sketch of how much we are going to spend and where are you going to put the money, how are you going to finance it, and the revenues for six-years,” Diokno confirmed.
Diokno previously stated that he isn’t exactly in support of raising taxes, as some of us were afraid of, to tackle the massive debt of an additional P5.3 trillion that was incurred during the first two years of the COVID-19 pandemic.
What Diokno wants is to improve revenue collections and leverage on the tax reforms that were already started during President Duterte’s term. Here’s to hoping we have a better idea on what the specifics of these plans entail soon.
Diokno is confident in his plans and he deems the developing proposal to be “state of the art” given that it’ll provide comprehensive “expenditure plans, revenue assumptions, budget deficit ceilings and financing programs over a three to six year period.”
Looking at the bright side
The optimism continues as the Department of Finance (DOF) claims that the Philippine peso remains to be “stable” despite going down to 53 against the US dollar last Friday, which was the most significant decrease in about three and a half years.
Who knew that after weeks of saying “the Philippines has no money”, the currency is still on fairly stable ground supported by strong macroeconomic fundamentals despite external complications, such as the rising gas prices and tighter monetary policy actions by the US Federal Reserve.
According to DOF chief economist Gil Beltran, the Philippine peso is in “the middle of the pack of the most stable currencies” as it ranks 8th among the 11 Asian currencies.
So far in 2022, the peso ranks only second to the Vietnamese dong.
Beltran confirmed that the Philippines also has the lowest external debt as a ratio of gross domestic product (GDP) at 27% among ASEAN economies in 2021.
Just for comparison’s sake, Malaysia hit a foreign debt ratio of 69.3%, while Thailand hit 39%. Vietnam and Indonesia hit 38.6% and 35% respectively.
While it may seem like a significant achievement for the Philippines, the 27% GDP of 2021 was significantly bigger than the 22.2% of 2019. Beltran calls for a more disciplined approach to debts moving forward.
According to the BSP, the offshore debt of the Philippines increased by 8% to $106.43 billion last year, from $98.49 billion in 2020.
Diokno’s fiscal plans need to hit a home run. Otherwise, we’re just going to keep running out.
